Mohamed El-Erian, economist and the chief advisor at the global financial services provider company Allianz talked about the Fed policy and its possible impact on the Bitcoin price.
Related: Allianz economist of making money on BTC and reasons for selling it
In a recent interview with Squawk Box, he mentioned the current problems that exist in the economy. According to El-Erian, dealing with inflation has been getting harder and the Federal Reserve is way behind.
The economist finds if the government raises the inflation target from 2% to 3%, both crypto and gold will go higher. El-Erian said that the recent crypto market decline took place when the price of gold was higher, and that caused concerns among crypto people.
He said that crypto is believed to go higher at the time of inflation, but it didn't play that role recently. El-Erian explained that the reason is that, unlike gold, crypto benefits from liquidity injections. The recognition that liquidity was going out from the system caused a price fall.
El-Erian described the process as the restoration of value and said it's a good thing. He added that now we are adjusting to a condition where liquidity is no longer abundant nor predictable.
Currently, the global crypto market cap stands at above $1.8 trillion with around a 4% increase in the last day. Bitcoin trades at about $40,000 and Ether at $3,000.