A lot of people are reluctant to jump into the crypto-pool. To them, price volatility in digital assets is a major concern and so is the thread of frauds and hacks.
Ergo, the leading question today should be – What would make this group absolutely comfortable to join the crypto-bandwagon?
It was in this context that Mohamed El-Erian, Former Chair of President Obama’s Global Development Council, shared some insights in a CNBC interview. The economist praised cryptos’ exponential surge this year. Moreover, he revealed that he even HODLed Bitcoin for a brief period, before selling them right before the rally to $60,000.
El-Erian purchased some amount of Bitcoin while it was trading at around $3,000 in the winter of 2018. “I felt compelled to buy it,” he added. However, he sold it after Bitcoin closed in on its previous ATH and moved past $19,000.
The economist also acknowledged a few factors behind Bitcoin’s recent rally. According to El-Erian, inflation fears and the launch of the first U.S. Bitcoin-related exchange-traded fund acted as key catalysts. Meanwhile, BTC just underwent the much-anticipated Taproot upgrade.
Despite the hike, however, the exec explained he remains cautious of “notoriously volatile assets” such as BTC, ETH, XRP, among others.
El-Erian also visualized BTC investors into three buckets – “Fundamentalists” who are in it for the long haul, professional investors looking to diversify their portfolios, and day trading “speculators.”
Needless to say, speculators (the last category) are usually the reason behind immense volatility. Ergo, the economist said he would,
“…only feel comfortable buying again once some of the speculators in the market are shaken out.”
This means that he would think about buying when short-term traders or speculators leave the market due to negative price movements. The first two types of investors, in his opinion, are “really strong foundations for the market long term.”
Importantly, the selling orders from these “speculators” have affected BTC in the past. For instance, just two months ago, the crypto faced a major correction phase, one that saw it falling to the $40k-mark. Here, short-term hodlers gave way to most of the losses.
By and large, Bitcoin and its sheer valuation have changed the mindsets of different individuals. Some, even if they aren’t involved yet, are surely impressed by the massive surge. Interestingly, Scott Minerd, Chief Investment Officer at Guggenheim Investments, falls in the latter category.