Paul Krugman, a Nobel Laureate in economics, says he has given up predicting bitcoin’s demise. The economist now recommends thinking of Bitcoin as a “cult that can last forever.” Despite this, Krugman maintains that bitcoin has no fundamentals.
Bitcoin is likened by Paul Krugman to a Cult That Can Survive Indefinitely.
Last week, Nobel Laureate Paul Krugman declared on Twitter that he had given up trying to predict bitcoin’s downfall. According to the Nobel Prize website, Krugman earned The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2008 “for his study of trade patterns and the location of economic activity.” Last week, the economist Tweed said:
“I’ve given up predicting imminent demise. There always seem to be a new crop of believers. Maybe just think of it as a cult that can survive indefinitely.“
Krugman, on the other hand, remains a bitcoin skeptic, claiming that the cryptocurrency has any fundamentals to debate.
“BTC isn’t a new invention; it’s been there since 2009, and nobody seems to have discovered a good legal use for it in all that time,” Krugman observed. “It isn’t a practical medium of commerce; it isn’t a reliable store of value; and it isn’t a unit of account.”
Krugman compared the cryptocurrency boom to a Ponzi scheme in an opinion piece published Thursday in The New York Times. “Cryptocurrencies play almost little part in normal economic activities after twelve years. Almost the only time we hear about them being used as a form of payment — as opposed to speculative trading — is when they are used as a form of payment is linked to unlawful behavior, such as money laundering or the bitcoin ransom paid by Colonial Pipeline to hackers who shut it down,” Krugman explained.
“Why are people willing to pay large sums for assets that don’t seem to do anything? The answer, obviously, is that the prices of these assets keep going up, so that early investors made a lot of money, and their success keeps drawing in new investors.“
“Its worth is based on the impression that it is a technologically advanced technique to shield yourself from the impending collapse of fiat money, which will happen one of these days, if not millennia. Or, as I put it, libertarian derp plus technobabble,” the economist added to his Twitter account.
“This may seem like a speculative bubble or a Ponzi scheme to you,” Krugman added, “and speculative bubbles are, in effect, natural Ponzi schemes.” “However, could a Ponzi scheme last this long? Yes, Bernie Madoff’s Ponzi scheme lasted nearly two decades, and it could have lasted even longer if the financial crisis hadn’t intervened… A long-running Ponzi scheme now need a story, and here is where crypto shines.”
Nonetheless, the Nobel Laureate economist came to the following conclusion:
“Are cryptocurrencies headed for a crash sometime soon? Not necessarily.“