Mohamed A. El-Erian , Columnist

What Does Bitcoin Volatility Mean for Other Assets?

Here are four crucial questions about crypto contagion.

May 23, 2021 at 9:00 PM UTC

Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief executive officer of Pimco, he is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy Fund Management. He is author of “The Only Game in Town.”

Bitcoin is still up more than 250% in the last 12 months despite the recent decline.
Photographer: Martin Bureau/AFP/Getty Images

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With the volatility of cryptocurrencies likely to persist — Bitcoin alone traded in a $30,000-to-$44,000 range last week — more people are wondering whether this will spell trouble for other financial assets such as stocks and bonds. The answer to this “crypto contagion” question, if considered narrowly, is no. It gets more complicated, however, in the broader market context, particularly in view of the cross-ownership of assets, leverage and market functioning.

Here are four contagion questions that investors need to consider: