On May 21, Nobel Prize-winning economist Paul Krugman tweeted a commentary on Bitcoin that he published in the New York Times, with the caption “Predictions are for a lot of hate mail, and ‘cults’ are not to be mocked “. In the New York Times commentary, Krugman said crypto assets like Bitcoin are a Ponzi scheme.
Tweets from Nobel Prize winner and economist Paul Krugman
Krugman argues that in the 12 years since its birth, cryptocurrencies have played almost no role in normal economic activity. The only time I’ve heard of it being used as a means of payment, rather than a speculative transaction, is in connection with illegal activities like money laundering or paying bitcoin ransoms to the hackers who shut it down. In its many meetings with cryptocurrency or blockchain fanatics, he believes that he still hasn’t heard a clear answer about what problems blockchain technology and cryptocurrencies have solved.
Why are people willing to pay large sums of money for assets that seem useless?
The answer Krugman gives is that the price of these assets keeps rising, so early investors make a lot of money and their success keeps attracting new investors.
Krugman argues that this is a Ponzi scheme, and a long-running Ponzi scheme needs a narrative – and narratives are what crypto markets are really good at. First, crypto promoters are very good at technical discussions, using arcane terminology to convince themselves and others that “a revolutionary new technology is being offered,” even though blockchain is quite antiquated in information technology standards and has yet to find any compelling use. Second, libertarians would insist that government-issued fiat currencies without any tangible backing could collapse at any time.
However, Krugman doesn’t think cryptocurrencies are necessarily headed for collapse anytime soon. That’s because even someone as skeptical of crypto as he is would be skeptical of gold’s durability as a high-value asset. After all, gold faces much the same problem as bitcoin; people may think it’s money, but it lacks any of the attributes of a useful currency.
Recently, the price of bitcoin has recovered several times after several big drops. on May 19, the price of bitcoin dropped as low as near $30,000, with an intra-day maximum drop of more than 30% and a blowout of more than $15 billion in 24 hours. On May 21, the price fell again from $42,000 to around $39,000 due to the news that the U.S. Treasury Department requires cryptocurrency transfers over $10,000 to be reported to the IRS, and has since risen again to $41,000. USD.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/nobel-laureate-krugman-bitcoin-is-a-ponzi-scheme-but-not-necessarily-headed-for-collapse-anytime-soon/
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