Paul Krugman, who in an article written for The New York Times already wondered if this would be the endgame for cryptocurrencies, is surprised that Bitcoin is still alive, but points out that the industry has evolved into exactly what it is supposed to replace .
That is, the economist says that Bitcoin was created in 2008, after the 2008 financial crisis, so that people did not have to trust banks, but today brokers such as FTX play a vital role for cryptocurrencies.
With regard to self-management of funds, Krugman notes that few people have the knowledge yet to take care of their private keys. As an example, he cites the old example of the British throwing 8,000 bitcoins in the trash, an amount equivalent to R$ 700 million today.
FTX bankruptcy exposes problems in the cryptocurrency industry
Paul Krugman has even called Bitcoin a Ponzi scheme, but this time he took it easy with his criticism. His analysis of the current situation in the industry could have been written by a cryptocurrency investor, after all, it makes sense, unlike his other texts.
The FTX meltdown, one of many in the industry, has only exposed what has been going on for nearly 14 years. While Bitcoin was created not to depend on third parties, these are the owners of the largest bitcoin wallets.
“The cryptocurrency ecosystem has, in fact, evolved into exactly what it was meant to replace: a system of financial intermediaries whose ability to operate depends on their perceived trustworthiness.”
In other words, investors use brokers like banks, and even after a run on withdrawals, this should remain the default for most people.
Krugman, winner of the Nobel Prize in Economics precisely in 2008, argues that most people do not have the skills to manage their own money. Therefore, they would rather trust others than themselves.
Game Over for Cryptocurrencies?
Instead of calling Bitcoin a Ponzi scheme, Paul Krugman compares the largest cryptocurrency to gold this time. That is, it notes that Bitcoin has not gained traction as money, but that its defenders treat it as a store of value.
It is an evolution of the economist’s thinking, even if he remains pessimistic about the future of cryptocurrencies. His main argument is that the future of cryptocurrencies is in the hands of regulators, the same view as the CEO of PIMCO.
“Even if Bitcoin’s value doesn’t reach zero (which it still could), there’s a strong argument that the cryptocurrency industry, which was so big just a few months ago, is headed for oblivion”concludes Paul Krugman.
Finally, it is still too early to know the consequences of the bankruptcy of the third largest cryptocurrency exchange in the world, FTX. However, it is possible that investors will learn from this mistake, which could strengthen Bitcoin, which continues with its values intact despite the price drop.
Source: Live Coins
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
