Paul Krugman equates cryptocurrencies with the housing bubble

Paul Krugman, winner of the Nobel Prize in Economics in 2008, does not appear to be totally convinced by the current cryptocurrency ecosystem. Not only that, but it compares their current condition to the one we lived in nearly fifteen years ago, which gave rise to a crisis whose effects rippled throughout the world, and which is still well remembered by those who endured its consequences... that we are the large majority.

Jun 7, 2022 - 23:01
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Paul Krugman equates cryptocurrencies with the housing bubble

The housing bubble, to which Paul Krugman alludes, was a crucial factor in the subprime mortgage crisis exploding, with prices rising like foam as financial institutions provided mortgage loans practically blindly, without risk analysis. The almost universal view was that house prices could never decrease; just a few saw that the situation was unsustainable and that the bubble would eventually collapse, which it did in 2008.

Paul Krugman compares the consideration that housing had as an investment before the bubble burst, with the current mentality of the cryptocurrency ecosystem and its investors, and further, he proposes that the "final" of the same can come with such an explosive blowout, for investors, as we experienced when it was more than proven that the price of housing could indeed go down, and by a lot.

" Cryptocurrencies have become so valuable and popular that people mistakenly believe they are worth something," writes Paul Krugman in a New York Times column titled From the Big Short to the Big Scam, comparing the great "short" (an investment that bets on a negative return on the asset in which the investment is made) to the big scam. The title of the film The Big Short depicts the story of the subprime mortgage crisis from the perspective of those who understood what was going to happen before it did.

Like the confidence in home values that led to the subprime mortgage crisis, Paul Krugman believes that we now live in a situation in which the large number of opinions that consider cryptocurrencies such as Bitcoin and Ethereum to be excellent investments condition many people who are skeptical of them. As a result, they become investors, expanding a bubble that is getting closer to bursting by the day.