Nobel Laureate Paul Krugman has joined the ranks of the world’s intellectuals and business moguls to give the thumbs-down to cryptocurrency.
Last June, the American economist drew parallels between the cryptocurrency craze and the real estate bubble of the mid-2000s, stating that consumers’ belief in crypto assets is comparable to their enthusiasm in the US home market prior to its collapse.
Fast forward six months, Krugman has compared the crypto to Tesla and its stocks.
On Tuesday, Krugman wrote an opinion piece in the New York Times regarding Tesla, bitcoin, and their massive market prices.
In his article, he inquired:
“Did the Tesla story ever make sense?”
He added:
“Tesla and bitcoin may have more in common than you think.”
Photo: IANS
Tesla Stocks Down
Krugman’s remarks came after Tesla’s stock fell 11.4% in response to reports that the company reduced its manufacturing output in China.
Between the first week of January 2020, and November 2021, Tesla’s stock price increased by more than 13 times.
Since then, the stock has dropped 73%, reducing the market valuation of the electric car firm from almost $1.2 trillion to less than $350 billion as of Tuesday’s close.
Krugman is a notable author and educator who specializes in International Economics and Macroeconomics. He is a Yale University and Massachusetts Institute of Technology graduate.
Paul Krugman. Image: Bitcoin.com
The recipient of the Nobel Memorial Prize in Economic Sciences, Krugman stated that Tesla is not as valuable as Apple and Microsoft and lacks the “network effects” of these tech titans.
The economist indicated that the two tech juggernauts and retail giant Amazon have remained dominant due to “high network externalities.”
He claimed that a significant portion of Tesla’s appeal was due to the perception of its CEO Elon Musk as a “cool guy,” but that perception has waned in recent weeks.
He even joked that he would not trust the billionaire to feed his cat.
Krugman also made a link between the enthusiasm and confidence that fuelled Tesla stock during the COVID-19 global health crisis and the meteoric ascent of bitcoin during the same time frame.
Crypto total market cap at $751 billion on the daily chart | Chart: TradingView.com
Thumbs Down On Bitcoin
According to Krugman, cryptocurrencies are “buildings constructed on sand, but on nothing at all.”
This year, the prices of all cryptocurrencies have fallen, wiping off more than half of their value.
Krugman also emphasized bitcoin’s lack of practical applications and its popularity with money launderers.
Image: Cryptocurrency News
He said:
“Something similar surely happened with Tesla, even though the company does actually make useful things.”
According to data from Coingecko, the price of bitcoin has increased by 0.5% in the previous 24 hours and is currently trading at $16,515.
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Featured image: Paul Krugman. Reuters/Brendan McDermid