El-Erian: ‘Crypto is going through what most innovations go through'

Mohamed El-Erian, the Queens’ College Cambridge President discusses the current economic effects on the cryptocurrency market and why crypto is going through a cycle similar to other historic innovations.

Video transcript

MOHAMED EL-ERIAN: Crypto is going through what most innovations go through, which is round one, you get overproduction and overconsumption. And the reason why you do that is because you suddenly lower the barriers to entry to a certain activity. And you get too much consumption of it and too much production of it. And we saw that with what's proliferated on the supply side.

And we saw lots of people coming in, who didn't quite understand what that crypto space really is. They just saw prices going up and thought they would go forever. So we had a massive speculative demand. We're washing all that out. You're washing right out the supply side and the demand side. And the hope is that you reestablish a stronger foundation, as tend to happen with innovations. That happened during the steam engine. It happened during fiber optics. It happened even during synchronization into 2000. The first round isn't particularly good.