“I think, at the end of the day, if it’s really successful … [regulators] will try to kill it,” Mr Dalio, the founder of Bridgewater Associates, on Wednesday told delegates at the Salt Conference, an annual gathering of hedge fund managers in New York City.
“But that doesn’t mean it doesn’t have a place,” he said, according to reports by the Financial Times and Bloomberg.
Governments do not want alternative currencies to succeed but investors should diversify their holdings, he said.
Bitcoin is currently trading above $46,000, according to CoinDesk. The largest cryptocurrency hit a record of about $65,000 in April, driven by a tide of liquidity, fast-money bets and optimism about growing demand from institutional investors. But critical commentary later emerged, including the environmental cost of the energy consumed by computers that underpin Bitcoin.
An intensifying cryptocurrency clampdown in China also soured the mood. Bitcoin fell below $30,000 after the May rout.
Central banks around the world have been reluctant to endorse cryptocurrencies because of their speculative nature, lack of value and regulatory oversight.
Mr Dalio, 72, who has a $15.6bn fortune, according to the Bloomberg Billionaires Index, said he has some money invested in Bitcoin, but it is a small percentage of his investment in gold.
“First, know cash is trash, so don’t keep it in cash,” Mr Dalio said.
Mr Dalio, who is co-chief investment officer and co-chairman of the world’s largest hedge fund, also dismissed predictions by Ark Invest’s chief executive Cathie Wood that the price of Bitcoin would soar to $500,000 in five years.
It “doesn’t make sense”, Mr Dalio said, Bloomberg reported.
Ms Woods said that if she could own just one cryptocurrency, she would default to Bitcoin “because countries are now deeming it legal tender”.
El Salvador recently adopted Bitcoin as legal tender, while the Cuban government has said it will recognise and regulate the use of cryptocurrencies in commercial transactions.