Billionaire Hedge Fund Investor Ray Dalio Now Advises Holding a Small Amount of Bitcoin. Here's Why He's Wrong.

Ray Dalio, founder of Bridgewater Associates, has softened his stance on Bitcoin (CRYPTO: BTC) over the years. In 2017, he called it a bubble and said it's "not an effective storehold of wealth."

But now, in an article he published on Aug. 21, he recommended that investors hold "a bit of Bitcoin," as he believes most economies face debt and deficit problems. He considers non-government-produced money like Bitcoin to be one way to navigate this risk, and he expects it will do relatively well.

As far as how much "a bit" is, Dalio has previously said that allocating up to 2% of your portfolio to Bitcoin is reasonable. Even though I own Bitcoin, I disagree with Dalio's recommendation that risk mitigation is a reason to hold the cryptocurrency.

Bridgewater Associates Founder Ray Dalio. Image source: Getty Images.

Bitcoin doesn't reduce risk in a portfolio

Dalio recommended Bitcoin in response to a question about how investors should navigate the risk of a debt crisis and position their portfolios going forward. In fairness, he mentions gold first, with a suggested allocation of 10%-15% to reduce risk. But despite Bitcoin sometimes being called digital gold, it doesn't provide the same level of protection.

Bitcoin typically moves in the same direction as stocks. The S&P 500 and Bitcoin moved in the same direction in eight out of 10 years from 2016 through 2025, according to recent research by The Motley Fool. That includes 2022's bear market, when Bitcoin lost about three times as much as the S&P 500. If a debt crisis sends the stock market into a tailspin, Bitcoin could react similarly or even worse.

It's a different story when comparing gold versus stocks. The two tend to move in opposite directions, and in 2022, gold managed to hold its value, growing by a modest 0.3%. If you're worried about a bear market, gold is likely to help reduce losses in your portfolio more than Bitcoin would.

Bitcoin is worth considering, but it's not a must-have

Bitcoin can be a good addition to your portfolio if you want exposure to digital assets and you have a high risk tolerance. While extremely volatile, it has had periods where it outperformed the market by a wide margin, including 2024 and 2025.

If you're interested in Bitcoin, you can invest in the cryptocurrency itself or Bitcoin ETFs, and Dalio's guideline of up to 2% Bitcoin allocation is reasonable. Experienced crypto investors may want to go a little higher and possibly branch out to other cryptocurrencies, as well, but limiting your exposure is smart with such volatile assets.

However, you can also put together a well-rounded portfolio with just stocks and bonds. And if it's risk reduction you're after, Bitcoin isn't the best choice.

Lyle Daly has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.