Mohamed El-Erian says he bought bitcoins but sold it too soon

The famous economist Mohamed El-Erian says he bought some bitcoins a few years ago – but he incorrectly estimated when to sell due to “behavioral mistakes”.

The Allianz Chief Economic Adviser reveals that he bought an unspecified amount of bitcoins in the “cryptographic winter” of 2018, when the world’s largest digital coin was submerged almost $ 3,000 after a monster rally that climbed 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 was framing it. I had this level, I had an entry point.”

Subsequently, it maintained its position until the end of 2020, when bitcoin regained the level of $ 19,000. A few months later, bitcoin extended his wild ride and hit a record high over $ 60,000.

Bitcoin is now trading well above $ 60,000 and reaches and new historical maximum more than $ 68,000 last week. According to Coin Metrics, it last traded for about $ 65,810, an increase of almost 3% in the last 24 hours.

Analysts pointed to inflation concerns and run the program the first US fund traded on bitcoins as key factors in the rally. Meanwhile, the basic bitcoin blockchain has passed and major upgrade during weekend.

Nevertheless, bitcoin and its smaller competitors – among which they belong ethereum a XRP – are notoriously volatile assets. Bitcoin at one point half price after initially exceeding $ 60,000 as Chinese regulators intensified the intervention on mining and trafficking in cryptocurrencies.

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

When to buy again

El-Erian categorizes bitcoin investors into three groups: “fundamentalists” who are dedicated to this in the long run, professional investors who want to diversify their portfolios, and “speculators” of day trading.

The economist said he would only feel comfortable buying again when some speculators in the market were “shaken.” The first two types of investors, he says, are “really strong foundations for this market in the long run.”

Mohamed El-Erian

Olivia Michael | CNBC

“These other two levels are quite solid in terms of promoting bitcoin and other cryptocurrencies,” El-Erian said. “The key thing here is the basic technology and the model. And these two things will be very influential in the coming period.”

Like the bitcoin evangelists, El-Erian believes that the cryptocurrency is a “very disruptive force.” However, he does not think that it will ever become a “global currency” competing with the US dollar.

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

However, unlike cryptoskeptics, the former CEO of PIMCO does not believe that bitcoin can be “regulated so that it no longer exists.”

If the West is not careful, China will set standards for the world.

Mohamed El-Erian

Chief Economic Adviser, Allianz

As more and more mainstream investors enter the market, El-Erian thinks the crypto-industry should start working with regulators sooner rather than later to avoid the regulatory counterparts faced by Internet giants such as Amazon, Google a Facebook.

“When I talk to people in the cryptoindustry, I say you have a responsibility not to repeat the Big Tech mistake,” El-Erian said. “The big mistake of Big Tech was that they didn’t realize they were becoming systemically important, so they didn’t get involved in preventive regulatory discussions.”

“Crypto must take seriously that there are concerns about illegal payments; there are concerns about fraud; there are concerns about the stability of the platform,” he added.

El-Erian warned that China could try to overtake the US and other countries in the West in terms of digital currency and blockchain technology.

While the world’s second largest economy has largely banned cryptomen-related activities, it has ambitious plans to issue the central bank’s own digital currency and use blockchain technology which is the basis of many cryptocurrencies in other areas, such as Intellectual Property.

“If the West is not careful, China will set standards for the world,” El-Erian said.