Crypto will survive the current market sell-off because it’s here to stay. However, cryptocurrencies won’t replace fiat money anytime soon. That’s the assessment of Allianz chief economist Mohamed El-Erian.
“Cryptocurrencies will exist. They will become more and more widespread, but they will be part of an ecosystem,” El-Erian said at the Consensus: Invest conference in New York. “They will not be dominant, as some of the early adopters believed them to be.”
El-Erian said bitcoin cannot replace money because cryptocurrencies are commodities — not currencies. “They don’t have the intrinsic attributes of a currency,” he noted. “It is not going to replace money.”
El-Erian: Crypto Is a Commodity
Despite the current bear market, a sea change is afoot thanks to burgeoning interest from institutional investors, said the former PIMCO co-chief investment officer.
“We are seeing a rotation going on — retail is becoming more reasonable,” El-Erian observed. “The exuberance is behind us, and institutions are starting to establish a foothold. And that’s good long-term.”
Mohamed El-Erian sees #crypto in a cycle driven by overconsumption and overproduction poised for normalization. Also interesting analogy to capital structure with technology at the top, followed by crypto and then ICOs. @elerianm @andrewrsorkin #ConsensusInvest @Allianz pic.twitter.com/XDrLLfpQ34
— Sadia Halim (@SadiaHalim) November 27, 2018
El-Erian reaffirmed his assessment from September 2018, when he insisted that crypto was not dead in the middle of a prolonged market slump.
However, he believes bitcoin was overvalued at the time, saying its buy value should be roughly $5,000, as CCN reported.
El-Erian says the recent slump was not unexpected, because the market underwent a cycle of over-consumption that caused bitcoin prices to rocket to nearly $20,000. That was followed by a reactive period of overproduction that fueled the current sell-off.
Crypto Bulls Undaunted By Bear Market
El-Erian says these machinations — which have been painful for many crypto traders — are healthy for the market.
This is a sentiment shared by Barry Silbert, the founder of Digital Currency Group. Silbert said the market’s dramatic recent fluctuations are the inevitable growing pains that occur in any new industry.
Having weathered past bubbles and market corrections, Silbert called the current discounted market a “fantastic opportunity.”
Silbert said game-changing disruptions are happening behind the scenes that are not reflected in the market’s tedious obsession with bitcoin price changes.
“What’s happening behind the scenes is companies are being built to create infrastructure to enable the on-boarding of a whole new category of investors,” he said. “That’s the institutional investors. So behind the scenes, nobody has slowed down.”
‘Unequivocal Yes’: NYSE Chair Says Bitcoin and Crypto Are Here To Stay https://t.co/hOqmy78Mwc
— CCN Markets (@CCNMarkets) November 29, 2018
Crypto evangelists like tech billionaire Tim Draper remain undeterred by the recent bitcoin slump, as CCN reported.
In contrast to Allianz’s El-Erian, Draper predicts that crypto will soon overtake fiat money to make up two-thirds of the world’s total currency value.
And Jeff Sprecher — the chairman of the New York Stock Exchange — said bitcoin and cryptocurrencies are definitely here to stay, notwithstanding the current bear market. “The unequivocal answer is yes [crypto will survive],” Sprecher said.
Featured image from Shutterstock.