- Paul Krugman has been a scathing critic of bitcoin and other cryptocurrencies for at least a decade.
- The Nobel Prize-winning economist has called them pointless, wasteful, and virtually worthless.
- Krugman has also dismissed crypto as mostly a tool for criminals, and in large part a Ponzi scheme.
Paul Krugman has repeatedly criticized bitcoin and other cryptocurrencies, dismissing them as useless, wasteful, niche, and only valuable due to hype and speculation.
Over the years, the Nobel Prize-winning economist and New York Times columnist has slammed the crypto industry for enabling criminals, complicating transactions, preying on vulnerable people, and operating as a pyramid scheme.
Here are Krugman’s 12 best quotes about crypto over the past decade, lightly edited for length and clarity:
1. “People think it’s smart, nay cutting-edge, to create a sort of virtual currency whose creation requires wasting real resources in a way Adam Smith considered foolish and outmoded in 1776.” (“Adam Smith Hates Bitcoin”) (April 12, 2013)
2. “To be successful, money must be both a media of exchange and a reasonably stable store of value. And it remains completely unclear why bitcoin should be a stable store of value.” (“Bitcoin is Evil”) (December 28, 2013)
3. The enthusiasm for cryptocurrencies seems very odd, because it goes exactly in the opposite of the long-run trend. Instead of near-frictionless transactions, we have high costs of doing business, because transferring a bitcoin or other cryptocurrency unit requires providing a complete history of past transactions. Instead of money created by the click of a mouse, we have money that must be mined — created through resource-intensive computations.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic”) (July 31, 2018)
4. “Cryptocurrencies have no backstop, no tether to reality. Their value depends entirely on self-fulfilling expectations — which means that total collapse is a real possibility. If speculators were to have a collective moment of doubt, suddenly fearing that bitcoins were worthless, well, bitcoins would become worthless.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic”) (July 31, 2018)
5. “There might be a potential equilibrium in which bitcoin (although probably not other cryptocurrencies) remain in use mainly for black market transactions and tax evasion, but that equilibrium, if it exists, would be hard to get to from here: once the dream of a blockchained future dies, the disappointment will probably collapse the whole thing.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic”) (July 31, 2018)
6. “Crypto has been effectively marketed: It manages both to seem futuristic and to appeal to old-style goldbug fears that the government will inflate away your savings, and huge past gains have drawn in investors worried about missing out. So crypto has become a large asset class even though nobody can clearly explain what legitimate purpose it’s for.” (How Crypto Became the New Subprime) (January 27, 2022)
7. “I’m seeing uncomfortable parallels with the subprime crisis of the 2000s. No, crypto doesn’t threaten the financial system — the numbers aren’t big enough to do that. But there’s growing evidence that the risks of crypto are falling disproportionately on people who don’t know what they are getting into and are poorly positioned to handle the downside.” (How Crypto Became the New Subprime) (January 27, 2022)
8. “Bitcoin plays into a fantasy of self-sufficient individualism, of protecting your family with your personal AR-15, treating your Covid with an anti-parasite drug or urine and managing your financial affairs with privately created money, untainted by institutions like governments or banks.” (“Guns, Germs, Bitcoin and the Antisocial Right”) (January 31, 2022)
9. “Cryptocurrencies play almost no role in economic transactions other than speculation in crypto markets themselves. And if your answer is ‘give it time,’ you should bear in mind that bitcoin has been around since 2009, which makes it ancient by tech standards; Apple introduced the iPad in 2010.” (“Crashing Crypto: Is This Time Different?”) (May 17, 2022)
10. “If you believe, as I do, that crypto is to a large extent a Ponzi scheme, this may just happen to be the moment when the scheme has run out of new suckers.” (“Wonking Out: Wasn’t Bitcoin Supposed to Be a Hedge Against Inflation?”) (June 17, 2022)
11. “Jim Chanos went on to call crypto a ‘predatory junkyard.’ Well, I wouldn’t go that far. Actually, on second thought, I would.” (“Wonking Out: Wasn’t Bitcoin Supposed to Be a Hedge Against Inflation?”) (June 17, 2022)
12. “The way I see it, crypto evolved into a sort of postmodern pyramid scheme. The industry lured investors in with a combination of technobabble and libertarian derp; it used some of that cash flow to buy the illusion of respectability, which brought in even more investors. And for a while, even as the risks multiplied, it became, in effect, too big to regulate.” (“Crypto Is Crashing. Where Were the Regulators?”) (July 11, 2022)
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