El-Erian sees Tesla's bitcoin move as a game changer for investors

Published Mon, Feb 8 202110:24 AM ESTUpdated Mon, Feb 8 202111:24 AM EST

Elon Musk's deeper foray into bitcoin helps legitimize its standing as a real currency and provides a real boost to investors, Allianz Chief Economic Advisor Mohamed El-Erian said Monday. Bitcoin's price soared following disclosure that Musk's Tesla bought $1.5 billion of the cryptocurrency and will begin accepting it as payment. The news served as two "powerful endorsements" for the digital currency, El-Erian said, further establishing it as a store of value and means of payment. Still, he anticipated that reaction to the news will be "all over the place." "Some will see it as visionary, others will say, 'Wait a minute, if I want to invest in bitcoins, I'll do it directly, I don't need Tesla to do it for me,'" El-Erian said on CNBC's " Squawk Box ." "And by the way, shouldn't Tesla be in cash management? Bitcoins are way too volatile for cash management." "You're going to see a whole range of reactions, but for bitcoin holders, today is good news for them," he added. Bitcoin soared another 14% on Monday, eclipsing $43,000 , which is more than four times above where it stood a year ago. The digital currency's most powerful acceleration coincided with the November U.S. presidential election. Bitcoin is up more than 200% since then as investors have found several reasons to take on what has been regarded as a high-risk investment. "What's consequential is that the argument for bitcoin is evolving," El-Erian said. "It used to be a negative argument — you don't trust the system, invest in bitcoins. You're afraid about inflation and about debasement, invest in bitcoins. Yields are too low on Treasurys, put bitcoin in your risk mitigation bucket." "Now suddenly you have those reasons and Tesla says there are positive reasons — form of payment, investment vehicle. So that is a pivot, and that's why you're seeing bitcoin prices at [nearly] $44,000," he added. In a regulatory filing , Tesla said it bought bitcoin for "more flexibility to further diversify and maximize returns on our cash." The move makes it the first automaker to accept bitcoin as a form of payment.

Elon Musk, Founder and Chief Engineer of SpaceX, speaks during the Satellite 2020 Conference in Washington, DC, United States on March 9, 2020.

Yasin Ozturk | Anadolu Agency | Getty Images

Elon Musk's deeper foray into bitcoin helps legitimize its standing as a real currency and provides a real boost to investors, Allianz Chief Economic Advisor Mohamed El-Erian said Monday.

Bitcoin's price soared following disclosure that Musk's Tesla bought $1.5 billion of the cryptocurrency and will begin accepting it as payment.