The Nobel-prize winning economist Paul Krugman has posted his thoughts on Bitcoin, following the heavy drop in the cryptocurrency this week.
Krugman was previously known for being a crypto-skeptic, self titling himself as this based on what he says are the inherent flaws in Bitcoin. Notwithstanding, the economist appears to have altered his 2008 views somewhat, admitting that, flaws and all, Bitcoin is here to stay.
“It’s not a convenient medium of exchange; it’s not a stable store of value; it’s definitely not a unit of account,” he wrote. “Its value rests on the perception that it’s a technologically sophisticated way to protect yourself from the inevitable collapse of fiat money, which is coming one of these days, or maybe one of these centuries. Or, as I say, libertarian derp plus technobabble.”
As the cryptocurrency market plunged to a 14 week low, several pundits voiced concerns that it signalled the imminent arrival of a bear market. Almost all major coins were impacted by the market drop, with ether losing almost 50% of its market value – their lowest since last April.
Krugman’s twitter comments on the survival of Bitcoin were somewhat more measured than other economists. The well-known Columbia economist Jeffrey Sachs, has spoken strongly against Bitcoin, stating that the world would be a better place without the digital currency.
And while Sachs may view the mass sell-off as a sign of the imminent demise of Bitcoin, there is an alternative narrative to read from this. Many have described this drop as a ‘healthy correction’, with Vinny Lingham, cofounder of Civic, describing this as a “pullback and a great buying opportunity”.
Bitcoin as an emerging money phenomena, flies in the face of the traditional financial system. And with the ability to shatter existing financial models, cryptocurrency takes away the power from financial institutions, governments, and a system that prioritizes spending over investing.
As investors and skeptics alike, react to the recent pullback, the extreme volatility of Bitcoin has been demonstrated once again. The impact of which has been reflected in China’s recent strengthening of their Bitcoin ban, as well as a general unease surrounding the future of the most popular cryptocurrency.
And yet, economists such as Krugman reluctantly admit that while Bitcoin has a number of flaws, it may just stick around.
“I’ve given up predicting imminent demise. There always seem to be a new crop of believers. Maybe just think of it as a cult that can survive indefinitely.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.