Disclaimer: This article is my respond to a view shared by Ray Dalio, the billionaire hedge fund manager of Bridgewater Associates, the biggest hedge fund in the world during his interview with Yahoo Finance. And as such, everything written in this article is based solely on my opinion and my limited understanding of bitcoin and the topic being discussed.
Outlawing Bitcoin
Question 1: Can bitcoin be outlawed?
Answer: Yes it can be.
Question 2: Will bitcoin be outlawed?
Answer: That’s a difficult question to answer. It mainly depends on how governments of certain countries perceive bitcoin and cryptocurrency in general. If the government of a country perceived bitcoin as a threat then they might pass bills or laws outright outlawing bitcoin similar to what India was planning to do.
The topic of banning cryptocurrency, was nothing new and had been discussed to death in all manners of articles, online discussions, news segments and the likes. The reason why I’m writing about it today was because of an article released by bitcoin News.
The article in question was about the response of Ray Dalio, the hedge fund manager of Bridgewater Associates when asked whether the government could outlaw bitcoin during an interview with Yahoo Finance.
In that interview, Ray Dalio answered that there’s ‘good probability’ that the government could outlaw bitcoin, pointing to the fact that bitcoin is very similar to gold and might suffer what gold had suffered during the 1930s: Being outlawed by the US government.
“Like back in the ’30s in the war years … cash and bonds were such bad investments relative to other things, there was the movement to those other things still, and then the government outlawed them … They outlawed gold.”
In his response, Dalio made use of history to support his claim which was good except for the fact that 1930s was a vastly different time compared to 2020s. Here’s why.
One, 1930s was what he called the ‘war years’. The US is not currently fighting a war; that is if you don’t count the war against Covid-19, and the trade war against China.
Two, gold wasn’t the only thing that was outlawed during that time. Meaning, gold was simply included among the things that were outlawed. Since it was war time, the government must simply find no value for it during that time. After all, large manpower was needed to mine gold – manpower that could be used to make weapons and fight wars among other things.
Another example that Dalio gave was India’s government plan to outlaw the trading and possession of private cryptocurrencies like bitcoin.
“You’re watching that question arise in India today. India today is making a move to outlaw it– outlaw possession of it.”
The India government was indeed planning to ban all private cryptocurrencies in the country, even making the possession of it illegal. But they’re not planning to ban all private cryptocurrencies just for the sake of banning it – the country wanted to mint their own digital currency, similar to that of China’s Digital Yuan.
In my opinion, India was just trying to compete with China, a country which they have a conflict of interest with.
Another thing to note was that the parliament was still drafting the bills and hasn’t really outright announced the ban. There’s still a possibility that it might not become an outright ban. After all, cryptocurrency trading is a huge industry in India, and the effect in the Indian economy won’t be small.
Misinformed Perspective or Just FUD?
Bitcoiners who watched the interview were understandably irked by what Ray Dalio said during the interview. Some call his perspective of the government ability to ban bitcoin, misinformed, while others claim that he’s just trying to spread FUD so he could buy more bitcoin at cheaper price.
Even Gemini co-founder, Cameron Winklevoss went to social media to repute Dalio’s claims. Winklevoss wrote:
“Bitcoin may have similar properties to gold but outlawing decentralized software is a much different problem. It requires you to essentially outlaw the Internet.”
I agree.
People might have look at bitcoin as digital gold and even treated it as one, being seen as a store of value, but the government can’t ban or outlaw it the way they banned gold. Bitcoin and other cryptocurrencies had already become an essential part of the internet. If the US government really wants to ban bitcoin then they need to ban the internet as well. Something that’s almost impossible to do nowadays.
I’m in the opinion that even Ray Dalio then actually believed everything he’d said during the interview. For a man like him to reach his current position, there’s no way that he’s that misinformed. Creating FUD and trying to low the value of an asset so you could sweep in and buy said asset in a much cheaper price was a time-tested strategy that big time investors liked to employ. And Ray Dalio might be doing exactly just that.
Why wouldn’t he?
There’s a lot of money to be make in bitcoin trading despite being so volatile. No, maybe because it was so volatile that a lot of money could be made out of it. Due to its volatile nature, bitcoin could go really high or really low with just a few words from an industry leader like himself. Remember how Elon Musk drives the price of dogecoin and bitcoin with just a few short tweets? Dalio might be using similar tactics to lower the price of bitcoin.
Of course, it’s just speculation on my part. It’s possible that Ray Dalio really do believed what he’d said during his interview with Yahoo Finance. Even if the global banning of bitcoin is impossible, country-wide or even state-wide banning is still possible. But whether the US would ban bitcoin the way they banned gold in the 1930s, the probability of that happening is actually very small and not the ‘good probability’ like Dalio claimed during his interview.
What do you guys think? Do you agree or disagree with Ray Dalio’s claim? Please write your opinion on the comment section.
Thank you for reading. See you all again next time.
News Article:
https://news.bitcoin.com/billionaire-hedge-fund-manager-ray-dalio-government-outlawing-bitcoin/
Image Source:
https://pixabay.com/photos/blockchain-technology-smart-bitcoin-3446557/
https://pixabay.com/photos/pinocchio-nose-lying-nose-long-lie-2917652/
You shouldn't agree. Banning Bitcoin will not stop Bitcoin from running, but will effectively disallow any institution, corporation, or individual investor to hold, trade or transact using Bitcoin inside the country that takes this decision.
Bitcoin as a network will probably won't be affected. But take a look at those that invest in Bitcoin today, how many hold their Bitcoin in non custodial wallets and how many just invest to sell later.
It is almost 100% of the new buyers that do not hold the private keys. Most of them are institutions , funds, companies and acredited investors that bought using Grayscale and other products, while retail is buying and holding inside crypto exchanges, as Coinbase and Binance, and stock trading apps like Robinhood, or payment processors as Paypal. Banning is easier than ever as everyone has been warned one way or another and understands the risks investing in Bitcoin.
What you all should look at is that there is a possibility Bitcoin will be banned. It is just allowed right now as the governments see profit from taxing those investors. If the disadvantages outweigh the advantages, then it will just be a matter of time.