'Bitcoin won't escape our scrutiny': Bridgewater is exploring an alt-cash fund in the face of money devaluation

Bridgewater Associates is taking a closer look at bitcoin, according to founder Ray Dalio.

"I am writing this to clarify what I think of Bitcoin," Dalio wrote in the column Bridgewater Daily Observations — the firm's daily newsletter sent by the CIOs to its clients, one of whom shared details with The Block. "I believe Bitcoin is one hell of an invention."

Dalio previously said that he didn't think bitcoin would work as an everyday currency. He stepped back a bit from his longstanding critique of bitcoin last month, saying that cryptos like bitcoin could be a "gold-like asset."

In the note, Dalio added that Bitcoin "looks like a long duration option on a highly unknown future that I could put an amount of money in that I wouldn't mind losing 80% of."

"This is what bitcoin looks like to this non-expert," he added. 

Dalio also expressed concerns about storing bitcoin securely against cyber attacks. He also challenged the idea that bitcoin is a scarce asset, noting that there are many other "bitcoin-like assets."

"I tell you that I and my colleagues at Bridgewater are intently focusing on alternative storehold of wealth assets and expect Bridgewater to soon offer an alt-cash fund and a storehold of wealth fund in order to better deal with the devaluation of money and credit that we consider to be a major risk and opportunity and Bitcoin  won't escape our scrutiny."

A spokesman for Dalio did not return comment ahead of publication.

The 14-page newsletter, a full copy of which was reviewed following the release of this article, digs into the historical performance of Bitcoin to divine whether it might function as an "alternative storehold of wealth." Ultimately, the Dalio letter indicates that it's too early to tell whether that future will come to pass.

As Dalio notes:

"Overall, it’s clear that Bitcoin has features that could make it an attractive storehold of wealth; it also has proven resilient so far. However, we have to acknowledge that this financial vehicle is only a decade old. In absolute terms and vis-a-vis established storeholds of wealth such as gold, how will this digital asset fare going forward? Future challenges may still come from quantum computing, regulatory backlash, or issues we haven’t even determined yet. Even if none of these materialize, Bitcoin, for now, feels more to us like an option on a potential storehold of wealth."

Editor's Note: Additional details from Dalio's letter have been added to this report.