Mohamed El-Erian says he bought bitcoin but sold too early

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Famous economist Mohamed El-Erian says he bought bitcoin a few years ago but misjudged when to sell due to “misconduct”.

Allianz’s chief economic adviser revealed he bought an undetermined amount of bitcoin during the “crypto winter” of 2018, when the world’s largest digital coin plunged nearly $ 3,000 after a monster rally that took it over $ 19,000 a year earlier.

“I felt compelled to buy it – I really did,” El-Erian said in an interview with CNBC’s Dan Murphy on Monday. “I felt like I framed it. I had that level, I had an entry point.”

He then held his position until the end of 2020, when bitcoin regained the $ 19,000 level. A few months later, bitcoin continued its wild ride, hitting a record over $ 60,000.

Bitcoin is now trading well above the $ 60,000 mark, hitting a new high of over $ 68,000 last week. It was last trading at around $ 65,810, up nearly 3% in the past 24 hours, according to data from Coin Metrics.

Analysts pointed to inflation fears and the launch of the first U.S. bitcoin-linked exchange-traded fund as key factors in the recovery. Meanwhile, Bitcoin’s underlying blockchain underwent a major upgrade over the weekend.

Still, bitcoin and its smaller competitors – which include Ethereum and XRP – are notoriously volatile assets. At one point, the price of bitcoin halved after initially surpassing $ 60,000, as Chinese regulators stepped up the crackdown on crypto mining and trading.

“You really don’t want to ask me about valuations because I don’t quite understand why $ 60,000 versus $ 68,000 is the right level,” El-Erian added.

When to buy again

El-Erian classifies bitcoin investors into three categories: “fundamentalists” who are there for the long term, professional investors seeking to diversify their portfolios, and “speculators”.

The economist said he would not feel comfortable buying again until some of the market speculators were “shaken”. The first two types of investors, he says, are “a really solid foundation for this long-term market.”

Mohamed El-Erian

Olivia Michael | CNBC

“These other two tiers are pretty strong in terms of support for bitcoin and other cryptocurrencies,” El-Erian said. “The key thing here is the underlying technology and the model. And those two things are going to be very influential in the period to come.”

Like Bitcoin evangelists, El-Erian believes cryptocurrency to be a “very disruptive force.” But he doesn’t think it will ever become a “world currency” to rival the US dollar.

“I think it will always exist in the ecosystem but it will not be a global currency,” he said. “It will not replace the dollar.”

Unlike crypto-skeptics, however, the former CEO of PIMCO doesn’t believe bitcoin can be “regulated out of existence.”

If the West isn’t careful, China will set standards for the world.

Mohamed El-Erian

Chief Economic Advisor, Allianz

As more traditional investors enter the market, El-Erian believes the crypto industry should start engaging with regulators as early as possible to avoid the regulatory hurdles facing the giants. from the Internet like Amazon, Google and Facebook.

“When I talk to people in the crypto industry, I say you have a responsibility not to repeat Big Tech’s mistake,” El-Erian said. “Big Tech’s big mistake was that they didn’t realize they were becoming systemically important, so they didn’t engage in preventative regulatory discussions.”

“Crypto needs to take seriously that there are concerns about bribery; there are concerns about fraud; there are concerns about the stability of the platform,” he added. .

El-Erian warned that China may seek to get ahead of the United States and other Western countries on digital currency and blockchain technology.

While the world’s second-largest economy has largely banned cryptocurrency-related activities, it has ambitious plans to issue its own central bank digital currency and apply the blockchain technology that underpins many cryptocurrencies in other areas. , such as intellectual property.

“If the West isn’t careful, China will set standards for the world,” El-Erian said.

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