Bitcoin Price Triple Its True Value, Claims Allianz Economist

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Allianz economic advisor Mohamed El-Erian says that the bitcoin price has far surpassed the cryptocurrency’s true value.

This month’s market contraction has prompted a new wave of bitcoin obituaries. The most notable one came from JP Morgan CEO Jamie Dimon, who called bitcoin a “fraud” and rehashed the tired Tulipmania comparison. Just yesterday, the Wall Street Journal published an article that claimed bitcoin is “probably worth zero.”

Lost in that shuffle was a bearish prediction from economist Mohamed El-Erian. The Allianz advisor is much less bombastic than Dimon, but told CNBC’s “Squawk Box” that bitcoin investors have priced in events that will never materialize. El-Erian conceded that bitcoin is a “disruptive” technology and stated he believes it will continue to exist as a means for peer-to-peer transactions, but he told the CNBC hosts that he thinks investors are far too optimistic about its long-term prospects.The current bitcoin price, he said “assume[s] massive adoption, which is not going to happen.”

He doubled down on that sentiment elsewhere in the segment, stating that central banks will not allow bitcoin to become a threat to the legacy financial system. “The current pricing assume massive adoption, and I don’t think governments will allow the amount of adoption that’s currently priced in,” he reiterated. When pressed for a specific valuation, El Erian stated a fair bitcoin price would be one-half or one-third of its present mark, which works out to about $1,300 to $2,000.

However, later last week El-Erian stated that “cryptocurrencies are not going away any time soon” during CME Group’s annual precious metals dinner, according to a report from Kitco Metals. Even though he argues it’s not “a substitute to gold,” he believes that cryptocurrency will remain a “part of gold’s problems” and that the precious metals industry must “pay attention to what cryptocurrencies are doing to your ecosystem.”

“Don’t underestimate when a small loyal customer base falls in love with another asset class,” he added.

Featured image from Shutterstock.

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Josiah is an assistant editor at CCN. A former ancient and medieval literature teacher, he has been reporting on cryptocurrency since 2014. He lives in rural North Carolina with his wife and children. He holds investment positions in bitcoin and other large-cap cryptocurrencies. Follow him on Twitter @Y3llowb1ackbird or email him directly at josiah.wilmoth(at)ccn.com.