Allianz’s chief economic adviser, Mohamed El-Erian, said that Bitcoin is not too big to fail, and governments may intervene. Although he believes that cryptocurrencies will become more and more popular, the economist stated that “it took a lot of things from the government,” he added, adding that this asset “can only establish its own status if the government allows it. .”
Economists warn government intervention, Bitcoin is not big
In an interview with CNN on Tuesday, Mohamed El-Erian stated that Bitcoin “would not be too big to fail” and that Bitcoin would fail because of the “liquidity paradigm.” May destroy the global monetary system.
The Egyptian-American El-Erian is the principal of Queens College at Cambridge University. He is also the Chief Economic Advisor of Allianz, the parent company of PIMCO, one of the largest investment management companies, where he served as CEO and Co-Chief Investment Officer.
He explained that there are three types of cryptocurrency investors. The first category includes those who use Bitcoin to mitigate risk, who see cryptocurrency as the “least non-performing asset.” The economist explained that because the Federal Reserve kept interest rates low, the price of government bonds had become artificially high, making it less attractive to investors seeking to mitigate risks and diversify their investment portfolios. He pointed out that under normal circumstances, investors will turn to gold, but because this metal has also encountered difficulties, so despite the high volatility, investors are still turning to Bitcoin.
The second category is speculators, and the third category is investors who truly believe in currency depreciation. The economist added that investors believe that crypto assets will become popular in the private sector, and the government will not intervene. Although El-Erian also believes that the demand for cryptocurrencies will rise, he is not sure whether the government will intervene. The chief economic adviser of Allianz warned:
I tend to tell people: be very careful. This is an asset that wants to build oneself, but can only build oneself with the permission of the government. It took a lot of things from the government.
As for whether Bitcoin is too big to fail, he said: “From a narrow perspective, it is not too big to fail. From a broader perspective, this will be another challenge for the liquidity paradigm. .”
He elaborated that liquidity “fills the entire system” but still encourages “excessive and irresponsible risk-taking” in certain areas. El-Erian pointed out that the collapse of Archegos Capital last week caused several stocks to plummet and caused billions of dollars in losses to investment banks. In addition, the financial market chaos surrounding Gametop in January and other severely short-selling meme stocks pushed up prices and depressed short sellers.
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