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Appearing on CNBC’s Squawk Box on Monday, Allianz Chief Economic Advisor Mohamed El-Erian, said that the prices of cryptocurrencies, like bitcoin, will “go higher” as a result of the U.S. Federal Reserve’s response to inflation.
Discussing the hot topic of the U.S. economy and skyrocketing inflation, El-Erian explained:
“I think the markets have understood that we have three issues. One is high, persistent inflation is with us. Two is the Fed is way behind, and three, the pathway for orderly disinflation is pretty narrow.”
He added:
“So, the big question is: can we navigate this inflation growth landscape that has become much more difficult?
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About the long-term outlook for the crypto market the Allianz Chief Economist said:
“I think the concern for the crypto people is that this decline is happening at a time when gold is up and hitting almost $2,000.
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New players only. Exclusive Welcome Bonus of up to $2,500Because the big argument for crypto is it’s a diversifier. At the time of inflation, it’s attractive. And recently, crypto hasn’t played that role.”
The economist continued:
“There’s a reason why, and that’s because crypto, unlike gold, benefited enormously from all the liquidity injections.
So what you’re getting in crypto is a tug of war between a recognition that liquidity is going out from the system as a whole and attractiveness as a diversifier. So far, it’s the liquidity element that is winning out.”
In times like these, the Allianz chief said, it all comes down to value:
“What you are seeing across the board is the restoration of value, and that’s a good thing. You’re seeing it in stocks, you’re seeing it in bonds, you’re seeing it in crypto.”
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El-Erian further discussed the fed’s actions in controlling ‘the damages’. When asked what will happen to crypto and gold if the Fed does what he is expecting, he responded:
“They both go higher.”