Ray Dalio, a recent convert to bitcoin, says investors should cut their exposure to the U.S. dollar, although he warns that tax changes could end up banning transfers to bitcoin in the country. However, MicroStrategy Incorporated (NASDAQ:MSTR) CEO Michael Saylor suggests bitcoin is the “obvious solution” for investors who do want to reduce their exposure to the dollar.
Q4 2020 hedge fund letters, conferences and more
Ray Dalio warns about tax changes for bitcoin
In a LinkedIn post, Dalio explained why bonds have become useless for preserving wealth. To try to pull in money to make up for the massive amounts of debt the federal government created in response to the pandemic, it plans to raise taxes. Dalio believes the situation could be a lot worse than anyone thinks and that taxes will become a "new paradigm."
Ray Dalio explained that "if history and logic are to be a guide," policymakers will raise taxes and won't like it when people move out of debt assets and into other stores of wealth like bitcoin or gold. Thus, they could "impose prohibitions against capital movements to other assets," he warned.
"These tax changes could be more shocking than expected," Dalio added.
"Inhospitable to capitalism"
Dalio noted that Elizabeth Warren's proposed wealth tax hike is of such an unprecedented size that he believes it will lead to more capital outflows and other moves to evade those taxes. He bases that view on his study of wealth taxes in other countries at other times.
Dalio warned that the U.S. "could become perceived as a place that is inhospitable to capitalism and capitalists." He added that Warren's tax bill is unlikely to pass this year, but the odds of a massive wealth tax bill passing in the coming years are significant.
Dalio advises investors to shift their portfolio out of debt and into non-dollar assets with a short cash position instead of maintaining the traditional stock and bond mix heavily skewed toward U.S. dollars.
Michael Saylor to Ray Dalio on bitcoin
In response to Ray Dalio's post, Saylor said bitcoin is the answer to the potential tax problems. He tweeted that he agrees with Dalio that bonds don't work as a Treasury asset anymore. However, he also said bitcoin is "the obvious solution, and much more practical than 'a well-diversified portfolio of non-debt and non-dollar assets' in 'Asian emerging… markets."
I agree with @RayDalio that bonds no longer work as a treasury asset. Respectfully, #Bitcoin is the obvious solution, and much more practical than "a well-diversified portfolio of non-debt and non-dollar assets" in "Asian emerging...markets". @elerianm https://t.co/YuWuJH6FJk
— Michael Saylor (@michael_saylor) March 16, 2021
CoinTelegraph notes that MicroStrategy is still adding to its bitcoin position. Saylor said last week that the company had bought 260 bitcoin for $15 million. MicroStrategy now owns more than 91,000 bitcoin.
