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Bitcoin Is a Buy at $5K, Says Allianz Chief Economist El-Erian

Chief Economic Advisor at financial services company Allianz, Mohamed El-Erian, told CNBC today, June 29, that he thinks Bitcoin (BTC) will eventually be treated as a store of value – and that he would consider buying if the price hits $5,000.

While El-Erian reports currently not owning any Bitcoin, the influential economist said he would consider buying at the $5,000 price point, explaining that his reasoning as being based on a “gut feeling.”

El-Erian dismissed Bitcoin’s skyrocketing prices in late 2017 as “pure speculation,” fuelled by people jumping on the crypto “bandwagon,” adding that:

“I don’t think you get all the way back to $20,000, but I do think that you need to establish a base whereby the people who really believe in the future of Bitcoin consolidate and then that provides you a lift.”

El-Erian went on to say that while he believes that cryptocurrencies will have longevity, they will take a different form to what we have today:

“I suspect that if you look 10 to 15 years down the road, we will have digital currencies, but the public sector will have involvement in that. It will not be pure Bitcoin. But the blockchain technology, take that seriously.”

In the long term, El-Erian considers that Bitcoin will not serve as a currency in so much as “another commodity-like asset out there that you can trade, and mainly as a store of value.”

In this regard, his position aligns with Bitcoin’s existing status in the eyes of the U.S. Commodities Futures Trading Commission (CFTC), who has classified the leading cryptocurrency as a commodity since as early as 2015.

El-Erian also believes crypto adoption rates “will be much slower than what the believers think.” He took the same stance back in September 2017, foreseeing Bitcoin’s subsequent “price explosion,” but suggesting that “mass adoption” wouldn’t happen, largely because of governments’ intervention.

Bitcoin is currently trading at $5,885, down almost 4 percent on the day, and over 20 percent this month. On June 24, BTC also plummeted below the $6K mark, reaching its lowest price level in 2018, a point it had not hit since October 2017.

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Deutsche Bank, Allianz, Auto1 Partner to Create Car Financing Blockchain Platform

German insurance group Allianz and Deutsche Bank have partnered with Berlin-based car exchange Auto1 to offer auto financing using blockchain technology, Cointelegraph auf Deutsch reported today, June 7. The three partners have created a new company called “Auto1 Fintech” of which they together own more than 50 percent.

The new venture will offer insurance products and loan refinancing for car dealerships that buy Auto1’s vehicles, said co-CEO Hakan Koc In an interview with Bloomberg. Auto1, which is backed by SoftBank Group Corp., is an online exchange for used cars that buys them from individuals and then resells them to dealerships.

The loan payment and refinancing confirmations will be recorded on a blockchain. The new process will ostensibly allow dealerships to immediately refinance their purchases, rather than using a paper-based process which can tie up their equity for over two weeks. Auto1 hopes that the new blockchain platform will help the company diversify its offerings and promote customer loyalty.  According to Koc:

“We are freeing capital and our customers are more liquid as a result. It’s a win-win.”

Auto1 is seeking to become the dominant internet platform for used cars. While they are already active in Germany, they company will expand into France and Poland later this year, according to Koc. Earlier this year SoftBank’s Vision Fund invested €460 million ($540 million) in Auto1, valuing the company at about €2.9 billion ($3.4 bln).

Other automotive companies around the world are testing blockchain technology applications ranging from simple financial transactions to autonomous driving support. In a pilot project, Daimler AG, the auto giant behind Mercedes-Benz, launched a blockchain based program to reward eco-friendly driving. Drivers who practice environmentally-friendly driving habits i.e. smooth and safe driving at low speeds, will receive MobiCoins, which they can then exchange for VIP tickets to events and other rewards.

In March, American automotive giant Ford Motors filed a patent for a vehicle-to-vehicle communication method that involves the exchange of crypto tokens to manage traffic flow. One example of a potential interaction would be if a driver were running late for an appointment, they could request to pass other vehicles for the next 10 minutes in exchange for a certain number of tokens.

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Insurance Giant Allianz Is Testing a Token to Move Money Internally

Insurance giant Allianz has been testing an internal token to move money around between its global affiliates without having to deal with currency conversions and other costs and inefficiencies.

Development of the so-called “Allianz token” is being helped along by blockchain startup Adjoint, which created a proprietary blockchain for the project, CoinDesk has learned. Adjoint declined to comment on the project.

But Oliver Volk, a blockchain expert at Allianz’s reinsurance unit and representative to the B3i insurance blockchain consortium, confirmed that the token was in the works.

“Yes, we are thinking about a kind of Allianz token whereby money coming in will be converted to a token,” he told CoinDesk, adding: 

“But it’s a very big animal and we don’t know what kind of regulatory constraints there are.”

Volk said an Allianz token would be “very helpful to get rid of FX constraints and other stuff we have to optimize, especially if you talk to certain currencies which we do not accept at our headquarters and have to be reconverted.”

He said it would make sense to rely less on the banking system, as this would result in numerous savings on commissions and could be used by Allianz all over the world (the Fortune 500 company has operations in 100 countries).

The internal digital token is a project of Allianz Global Corporate & Specialty (ACGS), the business-to-business part of the insurer. It grew out of an Allianz captive insurance blockchain project to disburse payments using Citigroup’s CitiConnect API. 

Alan Cabello, the innovation program manager for central and eastern Europe at Allianz AGCS, said the token idea cropped up from his previous prototype built for captives and retrocessions, the practice of one reinsurance company providing services to another.

“It’s essentially about the legal way of moving money from one side of the world to the other,” Cabello said. “Because of regulation and governance, etc., you need to move it from one entity to the next to the next – and that takes time.”

And that goes beyond the two or three days for a bank transfer to go through, he said. “It takes time to get every entity to book it, bind it; everybody at their own desk; it takes a lot of effort.”

The problem is widespread, Cabello added. “Every single major industry and every major company has issues getting money from one side of the world to the other.”

According to Volk, the corporate team at Allianz counted the emails one entity fielded regarding the transfer of a certain amount of money and it came to over 2,000.

Clients regularly ask where their money is, which is another reason Allianz thought of an internal token, Cabello said. “It’s what we have been playing with for the past few months.”

Cabello stressed that the token, while running on a blockchain, was nothing to do with cryptocurrency.

“It’s pegged to the dollar,” he said.  

Allianz image via Shutterstock.

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Major International Insurance Alliance Forms Swiss Blockchain Startup

The Blockchain initiative B31,  run by several international insurance companies, has announced the formation of the startup B3i Service AG in Zurich, Cointelegraph auf Deutsch reported on Monday, March 26.

The consortium aims to create a blockchain trading platform for a value-added chain of the entire insurance industry.

The B3i initiative and the newly founded B3i service AG are both backed by the major reinsurers Munich Re and Swiss Re as well as other major insurance companies, such as Zurick, Allianz and Aegon. While the research initiative initially focused on a pilot project to explore the potential use cases of Blockchain technology in the insurance industry, B3i Services AG will now implement the results in a functioning block-based trading system.

The previous pilot project by B3i for the international insurance coverage for natural disasters involved all in all 38 insurance companies and brokers. According to the blockchain initiative B3i the absolute efficiency gain from a full implementation of Blockchain is 30 percent, as stated in a press release on the project.

The formation of B3i Serve AG is no the first use of Blockchain technologies in the insurance industry. Companies such as Deloitte and a group of other insurers had also successfully tested the Blockchain for their customer management during a change of provider in November of last year. Also in September 2017, shipping giant Maersk, along with Microsoft, Ernst & Young and a number of insurers, completed a 20-week trial on Blockchain data management for cargo insurance.

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El-Erian Predicts Bitcoin Crash if Savvier Investors Sit Out Correction

While bitcoin’s price has recovered and held almost half of what it lost on last Friday, one commentator believed it reached a crucial juncture.

After the markets saw an epic drop of 45 percent in bitcoin’s price on Dec 22 — down to $10,800, taking nearly every other cryptocurrency down with it, the price has since stabilized somewhat in the $15,000 range. Meanwhile, the chief economic advisor of Allianz SE and former CEO of Pimco Mohamed El-Erianhas asked whether or not this could be a make or break moment for the bitcoin market. TEST PHRASE.

In his column on the Bloomberg View published on Dec. 26, El-Erian wrote:

“Either this sharp price correction will act as a catalyst for expanding what, until now, has been quite limited institutional involvement in this market — or it will become a stage in the deflation of a remarkable and historic asset bubble.”

Previously, El-Erian has called bitcoin more of a commodity than a currency because its price has remained too unstable for people to use it as a medium of exchange. Without walking that back, he acknowledged major milestones for the bitcoin market this year: its dramatic price increase, the opening of futures markets and very limited government intervention (besides from China).

Nevertheless, he argues that bitcoin has an underlying weakness: in his words, the longs are less sophisticated investors, the shorts are more sophisticated and institutional investors are largely sitting the market out, for now.

That said, some of that could change following a price drop, which can be a sign that unattractive irrational exuberance may be leaking out of a market. He writes:

“After bitcoin experienced one of the biggest roller-coaster weeks in its young history, the most important question facing it is whether the recent price correction will prove to be what market participants refer to as ‘healthy.'”

To prove itself, bitcoin investors will need to become more diverse, with experienced investors joining the retail investors in long positions and institutional investors joining the market at all. The correction will also need to yield what El-Erian refers to as “market-deepening products,” without further elaborating.

If it fails to grow in these ways, he writes that retail investors will face “a price appreciation and collapse that would rival even the biggest investment bubbles in history.”

Crystal ball courtesy of Shutterstock.

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Allianz Unveils Blockchain Prototype for Self-Insurance Products

Global insurer Allianz has unveiled a new blockchain prototype focused on “captive” insurance policies.

The prototype, the firm announced today, is aimed at providing a more streamlined approach for captive or self-insurance policies. With this type of product, a company will essentially insure themselves and their subsidiaries versus a more traditional policy purchase. Per Allianz, the complexities involved in this process – which can cover multiple jurisdictions – make the strong case for a more distributed solution.

According to Allianz, Citi Treasury and Trade Solutions handled the payment process involved with the insurance. The prototype utilized the Hyperledger Fabric 1.0 software, which was published by the Linux Foundation-backed consortium of enterprises in July.

Hartmut Mai, a board member for AGCS, said in a statement:

“We are currently seeing many blockchain applications in the financial services industry and we are eager to explore the potential of this exciting technology in the corporate insurance segment.”

The prototype’s unveiling is the latest indication that Allianz sees a potentially positive role for the tech within its services.

Allianz has been testing blockchain use cases as early as 2015, when it revealed that it had brought in a blockchain startup within one of its accelerator programs. Since then, the insurance giant has experimented with applications in areas such as catastrophe bond trading.

A video of Allianz’ prototype can be found below:

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Allianz building image via Shutterstock 

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Bitcoin ‘Trying to find Stability’: Allianz's El-Erian Softens Stance on Crypto

Allianz’s chief economic adviser Mohamed El-Erian has joined Bitcoin skeptics appearing to soften their stance on the cryptocurrency.

In a manner similar to JPMorgan’s Jamie Dimon, El-Erian, who previously stated Bitcoin should be worth 50 percent of its value, told CNBC it was “trying to find stability.”

“…It’s more of a commodity than it’s a currency,” he said, comparing Bitcoin to a commodity rather than a currency.

As Bitcoin reaches new all-time highs of $7,500, bubble concerns many expected are taking a back seat in light of a key decision by Wall Street giant CME Group to offer Bitcoin futures trading by the end of 2017.

When El-Erian made his previous comments in September, Bitcoin was trading around $4,000.

He had forecast prices would “explode,” but that adoption by the masses is “not going to happen.”

With Coinbase adding 100,000 users daily in November, El-Erian nonetheless voiced concerns about longer-term adoption prospects.

“My major concern over the long term is: is the assumption in the pricing about adoption consistent with reality? That’s the issue that investors should ask if they’re holding Bitcoins for a couple of months,” he added to CNBC.

For his part, Dimon had declared he would no longer mention Bitcoin at all after his infamous “fraud” accusations went viral and caused a price dip. Other JPMorgan senior executives have gone on record saying the banking giant is “open-minded” on the issue of cryptocurrency in general.

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Finance Bigwig Mohamed El-Erian Says Bitcoin Is a Commodity

Bitcoin cannot be considered a currency, one of the world’s most prominent financial commentators and institutional investors said.

Mohamed El-Erian told CNBC that currencies normally serve as a store of value, but that they must be predictable and stable to work as a medium of exchange.

El-Erian, who is currently the chief economic advisor at the German financial institution Allianz, continued:

“Bitcoins aren’t there yet, they’re still trying to find stability so it’s more of a commodity than it’s a currency.”

A former CEO and co-chief investment officer of fixed-income powerhouse PIMCO, El-Erian had previously said in September he believed bitcoin was overvalued, and that its price may reflect an assumption that the cryptocurrency will be adopted widely. At the time, he said that would not happen.

He doubled down on this assertion Thursday, telling CNBC that investors in bitcoin may be waiting for widespread adoption but that those thinking institutions and central banks would begin accepting it could be wrong.

El-Erian said his main long-term concern was whether “the assumption in the pricing about adoption [was] consistent with reality”

“That’s the issue that investors should ask if they’re holding bitcoins for a couple of months,” he told CNBC.

El-Erian is not the first major figure in mainstream finance to view bitcoin as more of a commodity than a currency. The governors of the Bank of Mexico and the Bank of Korea both gave similar assessments this year, as did the U.S. Commodity Futures Trading Commission in 2015.

Mohamed El-Erian image via World Economic Forum / Wikimedia Commons

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Bitcoin Price Will ‘Explode’ But Adoption ‘Won’t Happen’: Allianz Chief Economist

Bitcoin’s price will “explode” but mass adoption is “not going to happen,” Allianz’s chief economic advisor has said.

Speaking on US media network CNBC’s Squawk segment, Mohamed El-Erian told a panel that Bitcoin should be worth half or one third of its then $4000 price.

“The current pricing assume massive adoption, and I don’t think governments will allow the amount of adoption that’s currently priced in,” he explained.

“I think the price will explode, but I think it will exist because it’s a peer-to-peer currency.”

El-Erian joins an increasingly high profile debate on Bitcoin’s future, after China spooked markets with unsubstantiated claims it will ban exchanges, and JPMorgan CEO Jamie Dimon called it a “fraud.”

Dimon also suggested Bitcoin’s only “limited” use case would be as a p2p currency, specifically for Venezuelan citizens, North Korea and drug dealers.

“It exists in that world,” El-Erian continued about Bitcoin’s use as such a currency. “But current prices assume massive adoption, which is not going to happen.”

The increasing divergence in perspective between traditional finance figures and pro-cryptocurrency voices such as John McAfee, Max Keiser and investor Jeremy Liew, all of whom have given sky-high Bitcoin price predictions for the near term, is palpable.

As of press time, Bitcoin had meanwhile lost 5.3 percent in 24 hours to circle $3700. On Wednesday, analyst Tone Vays suggested the “perfect buy floor” would be $3000, where strong support meant he “didn’t think it will go any lower.”