Economists representing governments or large corporations often reserve critical or ambiguous judgment when it comes to cryptocurrencies. They step away from such conversations out of caution because of the volatile and decentralized nature of the product, but Allianz Chief Economist Mohamad El-Erian has deviated from the trend.
In an interview with Yahoo Finance, the economist said that cryptocurrencies are not dead, but overvalued. “Crypto is not dead, and certainly, the underlying technology is not dead,” said El-Erian. He further added that Bitcoin will be a “buy” if the price hovers around the $5,000 mark, as stated earlier in June in an interview with CNBC.
He spoke about the phenomenon of crypto-adoption as well, “we’re going to see more widespread adoption, by both the private and public sector of the blockchain technology and related technologies.”
Mohammad El-Erian laments that the trend of adoption “is not going to be as big and as quick as the proponents of crypto would like.” Although he is optimistic about the longevity of crypto but opines that “it’s not going to be the currency”.
Out of caution over Bitcoin, several governments have distanced themselves from the currency while embracing the technology that empowers it. The Chinese government, from September last year, began a crackdown on crypto and in May, released a book advocating blockchain. JP Morgan CEO, Jamie Dimon is one among many top financiers who have adopted the same approach.
However, the cryptocurrency market has taken quite a few hits in the past year. Commencing this year with a market capitalization of $612.95 billion, it reached a high of over $830 billion in the first week of January, and has since witnessed a freefall. Currently languishing at $194 billion, a loss of more than $400 billion since the start of the year. The market capitalization collapse is an accurate reflection of all the top coins in the market, with Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), and Stellar (XLM), all in decline.
Currently, Bitcoin is edging higher and is currently valued at $6,416 – a rise of over $200 since Sunday. The upward movement has come as a slight reprieve after a disastrous week, which saw Bitcoin drop from over $7,300 to just under $6,500 in a matter of 24 hours between September 5 and 6.
Financial experts from all corners of the world have been skeptical of cryptocurrencies. London Fintech Week’s founder Luis Carranza predicted that Bitcoin could decline to as low as $2,500 this year. In a statement to Express UK, he said: “$4,500 could be the bottom, but nothing is preventing $2,500 from being the bottom.”
ETX Capital analyst, Neil Welson, told The Guardian, “Selling pressure at the moment is intense as there has been nothing but bad news for bitcoin bulls of late. Trying to catch the falling knife is a risky game.”
The NYU Professor and American Economist, Nouriel Roubini, who is known for being a hard-hitting critic of cryptocurrency said that the value of the prime cryptocurrency, Bitcoin, could fall “all the way down to zero”.
On the other hand, several top economists have praised cryptos and are advocating its adoption. Jürgen von Hagen, a German economist at the University of Bonn, said, “Cryptocurrencies would become attractive if central bank issued currencies became very unstable. Their widespread use in the financial system would be a result, not a cause, of instability.”
Barry Silbert, founder and CEO of Digital Currency Group, stated, “As an asset class, it is here to stay…I’m 100% confident a decentralized, non-fiat form of money is here to stay.”
Image taken from Google & Charts from CoinMarketCap
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