Bitcoin (BTC) is underperforming against gold because the XAU/BTC ratio is up by 7.5% between July 21 and August 4. Amid these gains in gold price, billionaire Ray Dalio has come out to state that he favors gold over Bitcoin as a better asset to diversify a portfolio, especially now when signs of the AI sector being in a bubble are emerging.
Ray Dalio Explains Why He Prefers Gold Over BTC Amid Rising AI Bubble Fears
Dalio was speaking on the Diary of a CEO podcast, where he said that the increase in interest rates and surge in leveraged positions by retail traders suggest that the AI sector is in a bubble.
He noted that if the prices of AI stocks begin to drop, investors will start looking for other assets such as gold and Bitcoin, adding that gold will be the better pick because its price tends to gain when the prices of other assets are going down.
“So for most people, if they want to ensure they have some “hard currency,” then gold should account for 5% to 15% of their investment portfolio,” Dalio said.
Dalio’s warning about the AI sector being in a bubble comes after the FSB Chief, John Schindler, said that the drop in the prices of AI stocks could cause another financial crisis similar to the one that occurred between 2007 and 2009.
While Dalio names Bitcoin as one of the assets that investors can turn to if AI stocks drop, he notes that BTC is prone to hacks and government monitoring, and this makes gold a better option.
XAU/BTC Ratio Climbs 7% in Two Weeks
XAU/BTC has gained by 7.5% between July 21 and August 4. The gains come amid easing geopolitical tensions between the US and Iran after the two countries halted strikes and President Trump said they could resume talks to negotiate for peace.
The price of gold has also moved above $4,000 as buying pressure rises on the optimism that the conflict between the countries might end.
In contrast, the price of Bitcoin has dropped from $66,000 on July 21 to trade at $63,700 today, August 4, with the drop coming after the hack on the Coldcard wallet overshadowed the bullish sentiment from easing tensions.
Still, the ADX line that is dropping suggests that the uptrend in XAU/BTC is weak.
Bitcoin Price Prediction as Bulls Defend 50-day SMA Support
Bitcoin price is up by 1.8% today, August 4, to trade at $63,633 at the time of writing. This gain has pushed the price of BTC above support at the 50-day SMA of $63,309.
BTC needs to close above this 50-day SMA for three straight days to confirm that the short-term trend is leaning bullish. Such a move could also push the price to the next resistance at the 150-day SMA of $69,537.
Still, the AO bars that are red and negative suggest that the long-term Bitcoin price forecast is still bearish. If the AO bars turn positive, Bitcoin price could close above the 50-day SMA and reach $69,000.
Data from SoSoValue also shows that inflows to Bitcoin ETFs reached $170 million on August 3, suggesting that demand from institutions is coming back. This could support a move to $69,000.