Criticism of bitcoin is coming from all directions as the market goes into the red and major crypto players struggle. Nobel Prize-winning economist Paul Krugman was highly critical of the blockchain in a recent op-ed. The economist even claimed that given the signs displayed, Bitcoin is trending towards its complete demise.
Blockchain and crypto are useless
The prolonged bear market and the collapse of FTX have awakened the critics against the cryptocurrencies. After the European Central Bank, it is around the winner of the Nobel Prize in Economics to attack Bitcoin. In an op-ed published in the New York Times, Paul Krugman believes that cryptocurrencies have failed and are useless.
Giving the example of Bitcoin, Paul Krugman argues that the asset was created to shadow trusted third parties. Bitcoin investors hope to protect their savings by not putting them in the hands of banks and often corrupt governments. Yet the cryptosphere players that Bitcoin investors use are more likely to steal their funds than banks and governments, the Nobel Prize believes.
The original rationale for Bitcoin was that it would eliminate the need for trust – you wouldn’t have to worry about banks taking your money or governments inflating its value. In reality, banks rarely steal their customers’ assets, while crypto institutions more easily succumb to temptation.
Paul Krugman, Nobel Prize in Economics
We think it’s important to remind Nobel Prize winner Paul Krugma that decentralized wallets exist. These allow investors to have absolute control over their funds with a simple private key. Using crypto companies like Binance, Bybit, … for custody of funds is just one option.
In the cryptosphere, entrusting the management of one’s assets to a third party is actually strongly discouraged. As crypto savvy people keep saying, NOT YOUR KEYS, NOT YOUR ASSETS. On this point, Bitcoin has undoubtedly succeeded as an alternative to trusted third parties.
On a completely different note, Paul Krugman argues that bitcoin really doesn’t serve as a safe haven. The Nobel Prize winner believes, for example, that fiat currencies are only subject to high inflation during political chaos. Bitcoin, on the other hand, which is not based on anything, can collapse at any time. The Nobel laureate wants to prove this by the current bear market after crazy ATH reached by several crypto-currencies a year ago.
Since then the prices of crypto-assets have plummeted and an increasing number of institutions in the sector have collapsed… It’s an incredible story and also a tragedy. It’s not just small investors who have lost much if not all of their savings. The crypto bubble has had a huge impact.
Paul Krugman, Nobel Prize in Economics
Let’s be clear, Paul Krugman is right that the price of bitcoin has collapsed. A year ago, Bitcoin was trading at over $68,000. Today its value hovers around $17,000. Short-term Bitcoin investors and/or those who don’t practice simple crypto investing strategies like DCA are likely to be at a loss. On the other hand, over the long term, bitcoin has proven its effectiveness.
What Paul Krugman doesn’t say is that fiat currencies are not doing any better either. Inflation continues to bleed the world, including Europe. Countries like Estonia, Lithuania and Latvia are experiencing monthly inflation rates of over 20%, even though they are not in political crisis.
The current bear market will take bitcoin with it
Paul Krugman has always been a strong critic of bitcoin and all crypto-currencies. Nevertheless, he has so far never mentioned its demise. In 2021 on Twitter, he even gave up predicting the imminent death of Bitcoin. For him, Bitcoin should be seen as a cult that should survive indefinitely.
Paul Krugman now seems to be changing his tune. For him, the current bear market is not a crypto winter that will go on like the previous ones. This time it is an endless winter that precedes the end of the crypto world.
The Nobel Prize winner bases his belief on a few signs. In addition to the collapse of FTX, the economist notes in particular the abandonment by many players of projects related to the blockchain. He cites the example of the Australian stock exchange, which cancelled its project to use a blockchain platform after five years of unsuccessful trials that cost it nearly $168 million. Paul Krugman also cites as an example the shipping giant Maersk, the shipping giant that abandoned its plan to use blockchain to manage supply chains.
A lot of people are saying we’re going through a crypto winter. It’s looking more and more like Fimbulwinter, the endless winter that in Norse mythology precedes the end of the world – in this case the crypto world, not just cryptocurrencies, but the whole idea of organizing economic life around the famous blockchain … Amidst the noise and furor over FTX, I don’t know how many people have noticed that the few institutions that have seriously tried to use blockchains seem to be giving up.
An insightful man (?)
The news about FTX and the abandonment of blockchain projects by some major players sounds apocalyptic. Nevertheless, one must always differentiate between the bankruptcy of a player in a sector with the bankruptcy of the sector itself.
As far as cryptocurrency is concerned, the sector has already seen much worse than the bankruptcy of FTX. It has nevertheless recovered. This is especially true of the fall of the Mt. Gox exchange in 2014. As Chainalysis explains, Mt. Gox was much larger than FTX when it fell. In the year leading up to its closure, Mt. Gox accounted for an average of 46% of crypto trading volumes. FTX averaged only 13% at the time of its collapse. In short, it’s up to you to make up your own mind.
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.
