In his opinion piece published in The New York Times on Thursday, January 27, Paul Krugman, a Nobel Prize-winning economist and a longtime crypto sceptic, compared the recent cryptocurrency crash with the subprime mortgage crisis of the 2000s. The famed economist said that there is evidence that the risks of cryptocurrency are falling on people who don’t know what they are getting into and are less well positioned to handle the disadvantages.
Citing the crypto market, which has seen $1.3 trillion of its market value wiped out in recent weeks, the Nobel laureate talked about people who are at risk of getting hurt, making the comparison with the subprime lending of the 2000s which culminated in the 2008 financial crisis.
While Krugman admits that cryptocurrency markets are not big enough to cause a global crisis, he does think the same groups of people targeted by lenders in 2008 are being preyed upon today. He sees that a crypto bear market would significantly affect more vulnerable people in society. He referred to research that identifies 55% of crypto investors are people who do not have a college degree.
While Krugman stated that he does not believe cryptocurrency will lead to a deep economic crisis the same way subprime mortgages did, he gave a warning and people will listen. The economist warned that regulators have made the same mistake they made on subprime. He said that regulators have failed to protect the public against financial products nobody understood, and many vulnerable families may end up paying the price.
Paul Krugman Is a Prominent Crypto Bear
The announcement by Paul Krugman comes at a time when everybody is talking about cryptocurrencies and Bitcoin, especially with the recent market selloff. Bitcoin, the world's flagship cryptocurrency, made an all-time $69,000 price point in November last year. In recent weeks, the price has plunged massively. At the time of writing, Bitcoin is trading at $37,727.60. While many are optimistic about the coin's future, many Bitcoin bears are also talking. The likes of Bill Gates, Peter Schiff, Warren Buffett, and Paul Krugman are all sceptical about cryptocurrency’s potential, having voiced concerns on the digital asset world.
