Nobel Prize-winning economist Paul Krugman believes there are similarities between the crypto market and the collapse of subprime mortgages. “There is increasing evidence that cryptocurrency risks are disproportionate to those who do not know what they are in and are inadequate to deal with the downsides,” he emphasizes. Did.
Nobel laureate Paul Krugman warns about cryptocurrency crashes like subprime mortgages
Nobel laureate Paul Krugman warned that cryptocurrencies are investing in an opinion piece he wrote in the New York Times published Thursday. Krugman was awarded the Sveriges Rick’s Bank Award for Economic Science in 2008 in memory of Alfred Nobel, as shown on the Nobel Prize website “In the Analysis of Trade Patterns and Locations of Economic Activity”.
Nobel laureates said they started by admitting that “cryptocurrencies have become a fairly large asset class” and that the market value of all cryptocurrencies reached nearly $ 3 trillion last fall. He added that the price of cryptocurrencies plunged, “cleaning up about $ 1.3 trillion in market capitalization.”
However, Krugman believes that “cryptocurrencies do not threaten the financial system,” and states that “numbers are not large enough to do that.”
Nonetheless, economists warned and elaborated, “There is a disturbing response to the subprime crash 15 years ago.”
I see an unpleasant resemblance to the 2000s subprime crisis … the risk of cryptography is disproportionate to those who don’t know what they’re in and are inadequate to deal with the downsides. There is increasing evidence that it has fallen to.
“Investors in cryptocurrencies seem to be different from investors in other high-risk assets, such as stocks that are disproportionately composed of wealthy college-educated whites,” Krugman explained. did. He quoted a survey by research organization NORC, stating that 44% of crypto investors are non-white and 55% do not have a college degree.
“Cryptocurrencies open up investment opportunities for a wider variety of investors,” NORC said, while Krugman said, “Subprime mortgage lending was celebrated as well … to a previously excluded group. It was welcomed as a way to unlock the benefits of owning a home. “
Krugman continued: “Cryptocurrencies whose huge price fluctuations seem to be seemingly unrelated to fundamentals are almost as dangerous as asset classes can get.”
Skeptics said cryptocurrencies are only valid for “money laundering and tax evasion,” warning Bitcoin as a bubble, and “it’s okay for investors to bet on skeptics.”
However, Nobel laureates warned. “But these investors need to be well prepared to make that decision and have sufficient financial security to bear the loss if the skeptics turn out to be right. There is. “He concluded:
Unfortunately, that’s not what’s happening. And when you asked me, the regulator made the same mistakes that he made in subprime. They cannot protect their people from financial products that no one understands, and many vulnerable families may come at a price.
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