Crypto Will Survive Bear Market But Won't Replace Money: Allianz Chief Economist

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."

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.”

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.

This article is protected by copyright laws and is owned by CCN Markets.

About the author

Samantha Chang
Samantha Chang

Samantha Chang is a New York City-based financial editor who writes about crypto and business at CCN. She is a law school grad and an alum of the University of Pennsylvania. Email her at [email protected] or follow her on Twitter at Samantha_Chang.

Do NOT follow this link or you will be banned from the site!