Bitcoin is Nearing a Moment of Truth

December 28, 2017

Bitcoin is Nearing a Moment of Truth

Last week  the most popular cryptocurrency experienced a drop of 45 percent, after which it has not still recovered and keeps on rebalancing its positions. One of the representatives of the financial world believes Bitcoin has approached the make-or-break point, which will determine the cryptocurrency fate.

The mentioned representative is the chief economic advisor of Allianz SE, as well as former CEO of Pimco Mohammed El-Erian.

"This sharp price correction will either act as an catalyst for expanding, as at the moment institutional involvement in the cryptocurrency market is limited, or it will become a stage in the deflating of a remarkable and historic asset bubble," El-Erian wrote in his column on the Bloomberg View.

Earlier, the expert called Bitcoin more of an exchange commodity than a currency because his rate was too unstable to be used as a means of payment. Despite this fact, El-Erian noted that this year there have been several important events for Bitcoin such as multiple price increases, the opening of futures markets, as well as relatively limited regulation.

Nevertheless, El-Erian believes that the recent price correction happened last week will eventually show whether the Bitcoin market is "healthy".

In order to prove this status, it is necessary for Bitcoin investors in the cryptocurrency to become more diverse, so that more experienced investors begin to take long positions, as well as the institutional investors joining the market at all. El-Erian also noted that this correction should contribute to the yield of "market-deepening products."

According to the expert, if it does not happen, investors will face a price appreciation and then collapse which would become one of the biggest investment bubbles in history.


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