Ray Dalio suggests investing 15% in Bitcoin and gold amid the United States' 'debt spiral'.

American billionaire and hedge fund manager Ray Dalio has recently recommended that investors allocate about 15% of their portfolio to gold or Bitcoin, in order to optimize the risk-to-reward ratio amid the debt crisis and the depreciation of the USD in the United States.

"If your goal is to optimize your portfolio for the highest risk-reward ratio, then about 15% of your assets should be invested in gold or Bitcoin," said the founder of Bridgewater Associates in the Master Investor podcast on Sunday.

Dalio stated that he owns a small amount of Bitcoin, but still leans heavily towards gold. However, the specific allocation between these two asset classes will depend on the views of each investor. Notably, the proposed level of 15% is a leap compared to the recommendation of only 1–2% at the beginning of 2022.

Dalio's statements were made against the backdrop of America's public debt exceeding 36.7 trillion USD, and the government is projected to issue an additional 12 trillion USD in bonds next year to fund expenses. He warned that the core issue lies in the devaluation of the currency as the government increasingly relies on borrowing.

The latest report from the U.S. Department of the Treasury further reinforces Dalio's assessment, estimating that the debt borrowing in Q3 will reach 1,000 billion USD — an increase of 453 billion USD compared to previous forecasts, due to weak revenue and declining reserves. It is expected that in Q4, America will continue to borrow an additional 590 billion USD, making the fiscal path increasingly precarious.

Bitwise published a chart on the total federal debt of America in response to Ray Dalio's recent proposal | Source: BitwiseDalio also warns that Western economies like the UK are falling into a similar debt spiral, and their local currencies are likely to continue to weaken against "hard" assets like gold and Bitcoin — tools he considers to provide effective diversification.

Although supporting the role of Bitcoin in investment portfolios, Dalio remains skeptical about its potential to become a global reserve currency. He argues that the transparency of the Bitcoin trading system makes it difficult for governments to accept, as "they can easily track who is trading with whom." Additionally, any vulnerabilities in the source code could undermine Bitcoin's position as an alternative currency.

BTC Price Chart | Source: Bitcoin MagazineIn the context of a volatile economy, both Bitcoin and gold have recorded strong performance. Bitcoin is currently trading around 118,148 USD, just about 4% lower than its historical peak of 123,230 USD on July 14, while gold prices have also consistently reached new highs recently.

Mr. Teacher