Ray Dalio Warns Fed’s QE Could Create Bitcoin-Driven Asset Bubble

Ray Dalio warns that the Federal Reserve's recent balance-sheet guidance may lead to a financial bubble instead of stabilizing the economy. This approach contrasts with traditional post-crisis QE strategies and could impact hard assets like Bitcoin.

The Fed plans to end quantitative tightening (QT) and resume growing reserves, which Dalio views as easing that might signal the Big Debt Cycle stage.
If this expansion coincides with rate cuts and fiscal deficits, it could result in the monetization of government debt, potentially inflating equity prices, compressing credit spreads, and impacting inflation.
Dalio highlights the potential for financial asset inflation if central banks buy bonds and lower real yields.

Implications for Bitcoin

The resumption of QE could increase liquidity, reduce real interest rates, and make bonds and cash less attractive, pushing investments towards risky assets like Bitcoin.
Rising inflation risks could lead investors to hedge with gold, commodities, and digital assets.
Bitcoin, seen as "digital gold," may benefit from this environment due to its scarcity and high-beta characteristics.

However, there is caution about medium-to-long-term risks. If inflation pressures return, policy tightening could lead to a market correction, aligning with Dalio's warning of a potential bubble burst.

At press time, Bitcoin traded at $99,717.