Economist Says Bitcoin Is not Too Large To Fail – Warns BTC Can Solely Get Established If Governments Enable It – Regulating Bitcoin Information
Alliance economic advisor Mohamed El-Erian says Bitcoin isn’t too big to fail and that governments could step in. While he believes the cryptocurrency will grow in popularity, the economist says “it is taking away a lot from governments” and adds that this asset “can only establish itself if governments allow”.
Economist warns of government intervention, Bitcoin is not too big to fail
Mohamed El-Erian said in an interview with CNN on Tuesday that Bitcoin is not “too big to fail” and that its failure could disrupt the global monetary system due to the “liquidity paradigm”.
El-Erian, an Egyptian-American businessman, is President of Queens College, Cambridge University. He is also Chief Economic Adviser at Allianz, the parent company of PIMCO, one of the largest investment managers, where he was CEO and Co-Chief Investment Officer.
He explained that there are three types of crypto investors. The first type consists of people who use Bitcoin to mitigate risk and consider cryptocurrency to be the “least bad good.” The economist said that by keeping interest rates low, the price of government bonds has become artificially high, making them less attractive to investors looking to mitigate risk and diversify their portfolios. Typically, investors turn to gold, but since the metal is also struggling, investors are turning to bitcoin despite its volatility, he noted.
The second type includes speculators and the third type of investors are those who genuinely believe that currencies will depreciate. The economist added that investors assume that crypto assets will become increasingly popular in the private sector and that governments will not interfere. While El-Erian also believes the demand for cryptocurrencies will increase, he isn’t sure the government won’t intervene. The Allianz economic advisor warned:
I tend to tell people: be really careful. This is an asset that wants to establish itself but can only establish itself if governments allow it. And it takes a lot away from governments.
As to whether Bitcoin is too big to fail, he said, “From a narrow perspective, it’s not too big to fail. From a broader perspective, this would be another challenge to the liquidity paradigm. “
He explained that there is ample liquidity “sloshing around the system” but still encouraging “excessive and irresponsible risk-taking” in certain areas. El-Erian noted that Archegos Capital’s implosion last week caused several stocks to fall and billions in losses for investment banks. In addition, the chaos in the financial markets in January surrounding Gamestop and other severely shortened meme stocks pushed prices up and put pressure on short sellers.
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