Mohamed El-Erian, the main economic advisor to Allianz, one of the world’s leading insurance companies, noted the advancement of Bitcoin (BTC) and the rest of the crypto market in the global financial system. The economist warned that the future of digital assets is ultimately subordinate to the decisions of national governments.
Interest in Bitcoin and altcoins has grown dramatically in recent months. For El-Erian, this is due to implicit investor confidence that the private sector will move towards adopting digital assets for its reserves or creating new services. However, governments have the possibility to alter that destiny.
“Bitcoin takes a lot away from governments. Take away ‘seigniorage’, the ability to provide currency.”
The Allianz adviser pointed out that many investors believe that the authorities of large and small countries cannot interfere in the functioning of the market, and they are wrong.
“Bitcoin is an asset that wants to establish itself, but it can only be established if governments allow it. I tell people to be careful, because you are not only assuming private adoption, but you are also assuming government tolerance. I’m not so sure there, “El-Erian slipped into a dialogue with CNN.
The economist explained that the recent rally experienced by BTC was the product of certain shortcomings of traditional mechanisms. For example, he noted that the easing policy of the US Federal Reserve (Fed) and the issuance of money made government bonds a less secure and less attractive financial tool. For this reason, large and small investors began to look for alternative assets.
“Normally, I would go for gold, but there is a problem with the gold market, so many more people have chosen bitcoins as a risk mitigator, which sounds absurd because bitcoins are incredibly volatile,” said the expert. He added: “This is the situation where BTC is, in the eyes of some investors, the least bad asset to use.”
In conclusion, El-Erian underlined that the future of the crypto market will be contingent, in part, on monetary policy: “The more growth in the money supply you will see, the more you will push people to BTC.”