Dalio's Warning: The Dollar's Long-Term Decline; Implications for Gold, Yuan, and Crypto

Ray Dalio, the founder of Bridgewater Associates, forewarns that the U.S. dollar may experience a sustained long-term decline against gold and other major currencies. He anticipates significant changes in global capital flows by 2025. This situation could potentially present new opportunities for cryptocurrencies as market dynamics shift.

Key Takeaways:

Ray Dalio foresees a long-term weakness for the U.S. dollar relative to gold and major currencies.
The dollar has declined significantly against gold, the euro, and the Swiss franc.
Dalio attributes the dollar's decline to structural fiscal issues and changes in monetary policy.
A steepening yield curve indicates shifting financial conditions, impacting borrowing costs and equity valuations.
Precious metals are currently attracting capital, which may be causing a temporary pause in cryptocurrency growth.

Dalio Warns Dollar Faces Long-Term Decline, Will Underperform Gold and Yuan

The Dollar's Weakness: Structural Fiscal Pressures

Dalio highlights that the dollar's decline is rooted in deep structural fiscal imbalances and changing expectations regarding monetary policy. He pointed out that there is almost $10 trillion in debt that needs to be rolled over, predicting that the Federal Reserve's efforts to ease policies and lower real interest rates will make “debt assets look unattractive, particularly for long-term holdings.” He anticipates that the yield curve will steepen further, indicating increasing interest rates on long-term debt compared to short-term debt.

Dalio also observes that past policies from the Trump administration are intensifying these challenges. He described the administration's approach as “an aggressive bet on capitalism” that includes stimulative fiscal policies and reduced regulations to bolster manufacturing. However, these actions could exacerbate wealth inequalities, as capitalists tend to capture most of the gains. He predicts that issues surrounding the value of money, or affordability, will likely become a significant political theme in the upcoming year, potentially impacting Republican performance in the House.

Geopolitical dynamics are also contributing to the dollar’s weakening. Dalio comments on a noticeable transition from multilateralism to unilateralism, which raises the stakes for conflicts and further fuels protectionism, deglobalization, and growing interest in gold.

Yield Curve: A Sign of Changing Financial Conditions

In 2026, the U.S. bond market showed its steepest yield curve since 2021, with the gap between two-year and 30-year Treasury bonds reaching 140 basis points, as reported by Bitfinex analysts.

Dalio Dollar Gold - US Treasury Yield Curve Chart

This steepening indicates that markets are preparing for policy rate cuts while demanding higher yields for long-term government debt due to ongoing inflation concerns and significant Treasury issuance. When long-term rates rise more steeply than short-term rates, it creates higher risk premiums alongside persistent concerns over inflation and fiscal situations.

Despite lower policy rates aimed at providing economic relief, the elevated long-term yields are raising overall borrowing costs, which somewhat neutralizes the benefits from short-term easing. This poses challenges for equities, especially growth stocks, whose future earnings are discounted more heavily.

In such turbulent times, Coinbase CEO Brian Armstrong has suggested that Bitcoin could serve as a counterbalance to the dollar, promoting fiscal responsibility among U.S. policymakers. Armstrong warns that unchecked inflation without corresponding economic growth could jeopardize the dollar's status as a global reserve currency.

Precious Metals Rally: Impacts on Crypto Markets

Bitcoin and Ethereum's recent price stability is linked to increasing investments in precious metals amid geopolitical uncertainty. According to Farzam Ehsani, co-founder and CEO of VALR, gold has appreciated by 69%, while silver has surged by 161% over the past year.

Long-term Bitcoin holders have begun to hold their assets for the first time since July, with Ethereum showing positive trends, including improved staking conditions and heightened transaction activity at low fees. Ehsani suggested that Bitcoin's current stagnation, coinciding with substantial gains in gold and silver, may be a precursor to a larger rally in the cryptocurrency market.

He forecasts that once the momentum for precious metals subsides, Bitcoin might rise to $130,000 and Ethereum could reach $4,500 in the first quarter of 2026. If gold and silver experience sharp corrections, the upside potential for Bitcoin and Ethereum could be even greater.

Dalio Dollar Gold - Bitcoin Price Chart

As of now, Bitcoin is trading slightly above $91,000, experiencing a nearly 1.5% decline over the past 24 hours.