With the recent volatility and a new low for 2018 in Bitcoin, falling to around $5,800 on Friday morning, the Chief Economic Advisor at Allianz, Mohamed El-Erian is focusing on the $5,000 level as a trigger to buy. This Wall Street guru suggests that Bitcoin would be a buy below the $5,000 level, and of course many would agree.
Note that we at Classiarius see powerful forces coming into place at the $5,000 – one being the likelihood of capitulation selling as long positions would be forced out while miners could be forced to turn off machines. Note that this mining factor is debated as prices for running these machines vary by country. Mr El-Erian sees Bitcoin becoming a tradeable commodity, perhaps more than other currencies. And he believes that blockchain, the technology behind cryptos is here to stay.
Currently there is only one cryptocurrency with a market cap above $100 billion, and that is Bitcoin, according to CoinMarketCap. Note that 6 months ago, there were 40 coins with market cap above 100 billion dollars. Mr El-Erain believes that the public sector will be involved in digital currencies in 10 to 15 years. History seems to confirm a pattern as such. There have been high hopes for Bitcoin for financial transactions and possible uses in the banking sector in the future. However, we at Classiarius think that there will be new technologies that challenge this first generation coin. Imagine the power of new coins in 10 years, and especially those with infrastructure that is 10 year advanced on the current blockchain technologies in the market.
El-Erian suggests that cryptocurrencies will likely be more like commodities and not currencies in the future. He feels it will be a commodity-like asset out there that you can trade and is mainly a store of value. Note that his market calls have been strong and knowledge of products extensive. We think he is on to something here.