Billionaire Ray Dalio, founder of Bridgewater Associates, warned that the soaring US debt is undermining the dollar's appeal as a reserve currency, prompting investors to turn to gold and cryptocurrencies.

Earlier today (3rd), Dalio shared written Q&A content from his interview with the Financial Times, stating that the fiscal indulgence of the US and other reserve currency countries is gradually eroding market confidence in fiat currency as a store of wealth.

Dalio believes that this is precisely prompting investors to turn to gold and cryptocurrencies, quite similar to the historical contexts of the 1930s-40s and 1970s-80s.

The bad debt situation of the US dollar and other reserve currency governments is threatening their attractiveness as reserve currencies and stores of wealth, which is precisely what has led to the rise in gold and cryptocurrency prices.

However, Dalio did not assert that cryptocurrencies would completely replace the dollar. He stated that 'cryptocurrencies, due to their limited supply, have become an alternative currency.' If the supply of the dollar continues to expand or global demand for the dollar decreases, cryptocurrencies will provide an attractive option for investors.

He added that as the fiat currency system depreciates relative to scarce assets, investors will be more inclined to allocate to 'hard currencies' like gold and bitcoin.

Although not all cryptocurrencies have a supply cap, the fixed total issuance of 21 million bitcoins is the most representative example. In July of this year, Dalio suggested allocating at least 15% of the portfolio to gold and bitcoin as a hedge against currency depreciation.

Stablecoin and US Treasury risk

Regarding stablecoins, Dalio downplayed concerns that large holdings of US Treasuries by stablecoins could undermine market stability.

He pointed out that the real issue is 'the potential loss of real purchasing power of US Treasuries in a high debt, high inflation environment.' 'As long as stablecoins are well-regulated, they do not pose a systemic risk in themselves,' but because their underlying assets are closely linked to US Treasuries, the stability of stablecoins ultimately depends on the health of US finances.

The end of the 'Great Debt Cycle'

Dalio described the current situation as the end of the 'Great Debt Cycle.' Policymakers now face a dilemma: either let interest rates rise and risk debt defaults, or continue printing money to pay off debts, further weakening the currency's value.

He warned that unless there is a significant change in policy in the coming years, both outcomes would threaten monetary order.

Aside from cryptocurrencies, Dalio's extensive remarks highlight his concerns about US debt, the weakening independence of the Federal Reserve, and increasing government intervention in business.

He even likened the current situation to that of the late 1920s to 1930s, pointing out that rising populism, geopolitical struggles, and disruptive technological developments are reshaping the global order.

Dalio emphasized that the intertwined effects of debt, politics, climate, and artificial intelligence will trigger 'huge and unimaginable changes' in the next five years.

Debt crisis raises red flags! Bridgewater's Ray Dalio: Allocate at least 15% of the portfolio to gold and bitcoin.

"Warning that the high level of US debt threatens the dollar! Dalio: Cryptocurrencies have become 'alternative currencies'" This article was first published on (Blockchain Customer).