Woofun AI reports that Bridgewater Associates founder Ray Dalio has issued a stark warning regarding the U.S. government's deepening debt problem, urging investors to hold "a bit of Bitcoin" to mitigate risks that could weaken the dollar and render bonds less attractive. Dalio stated on Friday that recent market dynamics align with the framework outlined in his book How Countries Go Broke, signaling a structural shift in sovereign creditworthiness.

Market indicators have recently mirrored these historical patterns, notably with Japan reducing its U.S. Treasury holdings and long-term U.S. bond yields rising alongside a depreciating dollar. Treasury Secretary Scott Bessent announced increased government buybacks of own bonds, a move crypto investors widely credited for last week's rally. Consequently, bitcoin surged from approximately $63,500 on Wednesday to above $78,000 by Saturday, triggering the force-closure of roughly $4 billion in bearish positions. Dalio argues that such buybacks occur when demand thins, yet Bessent possesses limited capacity to sustain this strategy.

Woofun AI data shows that the fiscal imbalance underpinning this volatility is severe, with the U.S. government expecting to collect about $5.5 trillion in revenue this year while spending roughly $7.5 trillion. This disparity leaves a deficit of around $2 trillion, adding to federal debt excluding intragovernmental holdings which stands near $32 trillion. Compounding the burden, interest costs alone are projected to reach about $1 trillion, creating a feedback loop where weak demand pushes yields higher as the government offers better returns to attract buyers.

Higher rates make borrowing more expensive, potentially weighing on markets and the economy, while the alternative of central bank money creation to buy more debt risks weakening the currency and raising inflation. Dalio views neither outcome as favorable and expects similar pressures in the U.K., European Union, China, and Japan. He posits that assets not issued by governments, specifically gold and bitcoin, will perform relatively well if currencies are devalued, serving as a hedge against systemic monetary erosion.

Dalio recommends underweighting bonds, holding roughly 10% to 15% of a portfolio in gold, and owning "a bit of Bitcoin." While he did not specify a current target allocation for BTC, he previously advised allocating 15% to "gold or Bitcoin" in 2025, up from a 2022 recommendation of just 1–2% in bitcoin. Acknowledging that earlier warnings appeared premature, he estimates a U.S. debt crisis will materialize in about three years.