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.