Billionaire hedge fund manager Ray Dalio warned that the global financial system is reaching a critical turning point.
Speaking to CNBC' s Andrew Ross Sorkin at the World Economic Forum (WEF) in Davos, Switzerland, Dalio said that central banks begin to "shy away" from fiat currencies and sovereign debt.
He said the "monetary order is breaking down," driven by eroding trust and shifting behavior among policymakers.
His comments came at a time when U.S. President Donald Trump threatened new tariffs on European allies following his controversial remarks questioning Denmark's sovereignty over Greenland.
Related: Billionaire Ray Dalio sends blunt warning about ticking debt bomb
Erosion of trust in the dollar system
Dalio argued that the escalating geopolitical tensions reflect a deeper fragility in the global system that relied on the U.S. dollar .
"Fiat currencies and debt as a storehold of wealth are not being held by central banks in the same way," Daliosaid. "The biggest market to move last year was gold — far better than the tech markets."
The Bridgewater Associates founder said the flight from fiat is a natural reaction to instability, echoing past cycles where geopolitical conflict and fiscal excess pushed institutions toward "harder" assets.
Dalio cautioned that the relationship between the United States and major foreign holders of U.S. dollars and Treasurys is becoming strained. As Washington continues to issue record levels of debt , the willingness of other nations to finance those deficits is declining.
"We know that both the holders of U.S. dollars … and those who need it, the United States, are worried about each other,"Dalio said. "If other countries holding dollars are nervous while the U.S. keeps producing more, that's a big issue."
He warned that similar dynamics throughout history, when allies began divesting from one another's debt, often preceded shifts in the global reserve structure.
"When you have international conflicts, even allies do not want to hold each other's debt. They prefer to go to a hard currency,"he said.
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Gold and Bitcoin emerge as alternatives
Dalio reiterated that investors should diversify amid weakening faith in fiat, recommending that gold make up 5% to 15% of a balanced portfolio.
Gold prices have soared more than 70% in the past year, recently topping $4,763 per ounce, outperforming even tech stocks.
Meanwhile, the crypto community sees Bitcoin (BTC) as a digital-age alternative to fiat-backed assets. In fact, Dalio himself holds a little bit of Bitcoin in his portfolio.
As fears of dollar debasement grew last October, Google searches for "Bitcoin" and "dollar debasement" hit record highs. Bitcoin briefly crossed $110,000 after U.S. debt surpassed $38 trillion, underscoring its appeal as a hedge.
Financial advisors and institutions are also warming up to digital assets.
A Bitwise/VettaFi 2026 Benchmark Survey found that 32% of advisors allocated client funds to crypto in 2025.
Bank of America recently advised clients to include 1%–4% exposure to digital assets.
Related: Bank of America Introduces Crypto Allocations for Wealth Clients
This story was originally published by TheStreet on Jan 20, 2026, where it first appeared in the MARKETS section. Add TheStreet as a Preferred Source by clicking here.
