Economic guru Mohamed El-Erian said he doesn't think bitcoin is a "fraud" but also doesn't recommend it for long-term investors.
Anyone looking to put money into bitcoin needs to separate the issue into two categories: the blockchain technology and the product, CNBC cited the Allianz economic adviser as saying.
"I don't think it's a fraud," El-Erian said at the Rabobank Food and Agribusiness Summit in New York.
"The question is, do you believe it will become a currency?" he pondered.
El-Erian, a Newsmax Finance Insider, spoke as two U.S. exchanges, including the parent of the venerable Chicago Mercantile Exchange, are racing to embrace bitcoin, dragging federal regulators into a realm skeptics call a fad and fraud.
The development shows how some big financial players are moving to co-opt the volatile cryptocurrency and lure more mainstream investors into the market, even before regulators have agreed on just what bitcoin is, Bloomberg reported.
"If you're a long-term investor, I wouldn't be buying bitcoins here," El-Erian said. "But I did say this at half the level where they are today."
"There is a presumption by a lot of advocates of bitcoins that it will become a currency. When you become a currency, you have massive adoption. That's what a currency means," he said.
"That second bit is what gives me some problems. I do not see bitcoins attracting the amount of adoption that is implicit in the price today."
The blockchain payment systems technology that powers bitcoin has been hailed by many on Wall Street, CNBC explained. El-Erian called blockchain a "major, major advance expected to be used increasingly in both the private and public sectors."
Meanwhile, CME Group Inc.’s contracts will debut Dec. 18. Cboe Global Markets Inc. didn’t announce a start date. Both got the green light Friday after going through a process called self-certification -- a pledge to the U.S. Commodity Futures Trading Commission that the products don’t run afoul of the law, Bloomberg reported.
The moves are a watershed for Wall Street professionals -- including institutional investors and high-speed traders -- who’ve been eager to bet on cryptocurrencies and their wild swings, but worried about doing so on mostly unregulated markets. The new products are subject to CFTC oversight. CME, Cboe and Cantor Fitzgerald LP’s Cantor Exchange -- which is creating another kind of bitcoin derivative, binary options -- promised to help the agency surveil the underlying bitcoin market.
“Bitcoin, a virtual currency, is a commodity unlike any the commission has dealt with in the past,” CFTC Chairman Chris Giancarlo said in a statement Friday. “We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms.”
Trading in bitcoin and other cryptocurrencies is largely unregulated, and that’s the point. Bitcoin was introduced in the wake of the 2008 financial crisis as a way of avoiding governments and central banks. Now with its meteoric rise and the proliferation of cryptocurrencies, banks, brokers and mainstream investors want in. And they want regulation, something they’ll get plenty of in a market like CME or Cboe’s.
Bitcoin rebounded on Friday to hit the day’s highs above $10,500, recovering from an earlier dip below $9,500 after the futures news.
Bitcoin, which had been trading at around $10,150 on the Luxembourg-based Bitstamp exchange before the news, jumped to as high as $10,513 in the 20 minutes that followed, leaving it up more than 5 percent on the day, Reuters explained.
It has been a volatile week for the biggest and best-known cryptocurrency. On Wednesday, bitcoin smashed through $10,000 before rocketing past $11,000 less than 12 hours later to an all time-high of $11,395, and then plunging around 20 percent in the hours that followed.
(Newsmax wire services contributed to this report).
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