Dalio backs Bitcoin as US debt crisis looms in 3 years

Ray Dalio expects Bitcoin to "do relatively well" as governments worldwide struggle with rising debt and large fiscal deficits, the Bridgewater Associates founder said in a LinkedIn post Friday.

"Most economies have similar debt and deficit problems," Dalio said, citing the UK, European Union, China and Japan alongside the United States.

Dalio warned a severe US sovereign debt crisis could arrive "in three years, give or take two" without structural policy adjustments. He projected federal expenditures of $7.5 trillion against revenues of $5.5 trillion, a $2 trillion budget deficit, with debt-servicing costs reaching $1 trillion and about $10 trillion in maturing debt requiring refinancing.

Dalio urged investors to cut bond exposure and allocate 10 percent to 15 percent of portfolios to gold, with a small position in Bitcoin, to hedge against currency debasement as long-term Treasury yields climb to multiyear highs.

A $2 Trillion Deficit and Rising Yields

The warning follows a surge in long-term Treasury yields. The 10-year yield rose to 4.74 percent, the 30-year to about 5.27 percent and the 20-year to around 5.20 percent as the bond selloff resumed Friday. The iShares 20+ Year Treasury Bond ETF (TLT) fell about 0.47 percent to near $81.95, lingering close to its 52-week lows.

Dalio said the environment aligns with the framework in his work "How Countries Go Broke: The Big Cycle," under which escalating debt-servicing expenses eventually outstrip market demand for government bonds. The imbalance forces authorities to tolerate higher yields or resort to central bank monetization, eroding fiat purchasing power and stoking inflation.

Gold Preferred, Bitcoin a Smaller Hedge

Dalio has long favored gold as his primary hedge against currency debasement, but his latest comments give Bitcoin a growing role. He disclosed in November that Bitcoin had represented roughly 1 percent of his portfolio for years, and in 2025 said investors could allocate as much as 15 percent of a portfolio to gold or Bitcoin as protection.

He has cautioned, however, that Bitcoin would struggle to become a major reserve asset because of limited financial privacy and the threat of quantum computing. Treasury Secretary Scott Bessent's efforts to curb bond volatility through enhanced buybacks of long-duration paper offered only brief relief, with yields climbing again by Friday's close.

The endorsement from a globally recognized macro investor could draw institutional attention to Bitcoin as a hedge against fiat debasement, supporting demand even as Dalio keeps gold at the center of his allocation advice.

This article is for informational purposes only and does not constitute investment advice.