“Twelve years on, cryptocurrencies play almost no role in normal economic activity.”
That was Nobel Prize-winning economist and New York Times columnist Paul Krugman questioning crypto’s tangible value in a recent op-ed piece.
The self-described “crypto skeptic” writes that while he often uses Venmo to split checks and buy groceries, and the PayPal-owned PYPL peer-to-peer payment service launched when bitcoin
did in 2009, he still hasn’t seen bitcoin, Dogecoin
or other digital tokens become as readily adopted for daily transactions by the masses. And this makes him wonder what the digital assets are really worth.
“By the time a technology gets as old as cryptocurrency, we expect it either to have become part of the fabric of everyday life or to have been given up as a nonstarter,” he says, before asking why people are willing to pay so much to invest in digital tokens that “don’t seem to do anything.”
“This may sound to you like a speculative bubble, or maybe a Ponzi scheme.”
Krugman says that all long-running Ponzi schemes need a narrative, which crypto has in spades. And this includes crypto boosters using “technobabble” to sell everyone on the idea that they’re offering a revolutionary technology, “even though blockchain is actually pretty elderly by infotech standards and has yet to find any compelling uses,” he writes.
He also flags what he calls “libertarian derp,” or “assertions that fiat currencies, government-issued money without any tangible backing, will collapse any day now” for fueling the desire to invest in digital tokens.
It should come as no surprise that the crypto community had some critiques about his column. In fact, Krugman even tweeted his article with the prediction that, “this will get a lot of hate mail,” because “the cult must not be mocked.”
Some critics cited predictions that Krugman has made in the past, which have not come to pass, as a means to discredit his skepticism toward cryptocurrency. A 1998 article in particular was being passed around online; in it, Krugman predicted that, “By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” The same column also suggested that the internet’s growth would slow “drastically” because “most people have nothing to say to each other!”
Funny enough, critics who had plenty to say to Krugman used the internet to roast him. Krugman’s name and column were trending on Twitter
into Friday morning.
It’s been a chaotic week for cryptocurrency holders, with bitcoin dropping 30% on Wednesday morning after China issued a crypto warning before it bounced back somewhat in the afternoon. As of Friday morning, bitcoin and ether
were both down by more than 40% from their recent all-time highs, and Dogecoin had lost half of its value.