Cryptocurrencies have no dearth of skeptics with relevant domain expertise, and now Nobel laureate Paul Krugman has joined that ever-expanding list of vocal pessimists. Krugman, who was awarded the Nobel Memorial Prize in Economic Sciences in 2008 for his pioneering work linking trade patterns with geography and globalization, compared the current crypto-verse with the stock and housing market crash of 2008 that led to losses worth over a trillion dollars for investors.
In a scathing opinion article for The New York Times, Krugman used the term Big Short — based on the book “The Big Short” by Michael Lewis that documented the housing market bubble — to describe the cryptocurrency industry as the Big Scam. Krugman further added that the whole ecosystem, especially stablecoins, is a “house built not on sand, but on nothing at all.”
One of the key arguments raised by the American economist is why, despite being worth trillions of dollars in market cap, these crypto-assets serve no real purpose when it comes to day-to-day business transactions. Krugman also asks how exactly crypto coins can make transactions easier compared to fiat currency and the existing online banking system. “The answers are always word salad devoid of concrete examples,” he adds.
Krugman cited the example of the housing bubble that kept growing, with only a few folks really able to see through the unchecked growth and bracing for a crash. The cryptocurrency world is going through somewhat of a similar phase. In just a span of six months, the crypto world lost over a trillion dollars in value. Bitcoin, the shining star of the crypto economy, is currently trading at around $30,000 dollars per coin, less than half of the peak it hit in 2021.
But it’s not just the tumultuous state of crypto coins that Krugman raises alarms about. The Nobel prize winner also notes how cryptocurrencies are becoming the favorite of criminals trying to launder money. Despite the existence of exchanges and the whole shebang around blockchain’s traceable design, cybercriminals have gotten away with hundreds of millions of dollars in assets using shady mixer services.
However, Krugman is not the only one comparing cryptocurrencies to a bubble. In a CNBC interaction last year, David Rosenberg, President and Chief Economist & Strategist at Rosenberg Research, touted Bitcoin to be one of the biggest bubbles out there, further adding that no one can predict when it’s going to burst. When the topic was broached in 2018, Warren Buffet told CNBC that he was certain about cryptocurrencies coming to a bad end.