Bitcoin's Future: Will It Remain Outside Central Bank Reserves?

Summary:
Billionaire investor Ray Dalio has expressed cautious views on Bitcoin's role in central bank reserves, emphasizing its limited supply but highlighting concerns over traceability and security.

Key Takeaways

Ray Dalio emphasizes Bitcoin's limited supply but cautions against its suitability for central bank reserves.
The transparency of Bitcoin transactions raises concerns about traceability and external interference.
Dalio prefers gold over Bitcoin for asset protection against government actions, while rating stablecoins as poor long-term investments.
Bitcoin's market dynamics are evolving, with predictions suggesting it could reach $250,000 by the end of 2027.

Bitcoin

Concerns Over Bitcoin's Traceability

In recent interviews, billionaire investor Ray Dalio has voiced skepticism about Bitcoin being suitable for central bank reserves while acknowledging its limited supply. He noted that while Bitcoin exhibits characteristics similar to money, its public transaction records and vulnerability to interference make it difficult for reserve managers to treat it like gold.

Dalio highlighted that the open ledger system that supports Bitcoin presents challenges for large custodians. He expressed concern over the traceability of public transactions, which, in certain situations, can be disrupted. This raises significant issues for institutions responsible for safeguarding national wealth. In contrast, Dalio pointed out that gold is generally more secure against government control once it is removed from the formal financial system.

Security Risks and Alternatives

Dalio also raised concerns regarding the security of Bitcoin itself. He mentioned the risks of Bitcoin being compromised, which could potentially diminish its value as a long-term store of value.

In his assessment, he gave low ratings to stablecoins as long-term investment options. He explained that stablecoins, being linked to fiat currencies and lacking interest, are better suited for quick transactions rather than wealth preservation. Personally, Dalio disclosed he holds a small amount of Bitcoin but sees gold as a superior choice for safeguarding assets from state intervention.

BTCUSD currently trading at $87,312. Chart: TradingView

Last year, Dalio advised investors to focus on scarce assets like gold and Bitcoin instead of debt instruments, as many major economies face increasing levels of debt. The landscape for crypto markets is shifting closer to mainstream finance, with the emergence of spot Bitcoin ETFs and enhanced custody services.

Market Predictions

Amid these discussions, predictions about Bitcoin's future price fluctuated. Analyst Alex Thorn suggested that Bitcoin could reach $250,000 by the end of 2027, emphasizing that 2026 may be too unpredictable for clear forecasting. Current options market data reflects an equal probability for Bitcoin hitting $70,000 or $130,000 by June 2026, and a 50% chance for either $50,000 or $250,000 by the end of the year.

According to Galaxy Research, ongoing macroeconomic and market challenges contribute to the difficulty in forecasting Bitcoin's performance in 2026. Their analysis indicates that Bitcoin is increasingly behaving like a macro asset rather than just a speculative investment. Despite varying opinions on Bitcoin’s policy suitability versus its price potential, Dalio remains focused on its acceptance as an asset on a reserve ledger, while others examine its market pricing under changing macro conditions.

Image credit: Unsplash; Chart credit: TradingView