- Paul Krugman has been an acerbic critic of bitcoin and other cryptocurrencies for at least a decade.
- The Nobel Prize-winning economist called them useless, wasteful and virtually worthless.
- Krugman also dismissed crypto as primarily a tool for criminals, and largely a Ponzi scheme.
Paul Krugman has repeatedly criticized bitcoin and other cryptocurrencies, dismissing them as useless, useless, niche, and only valuable due to hype and speculation.
Over the years, the Nobel Prize-winning economist and New York Times columnist has criticized the crypto industry for enabling criminals, complicating transactions, preying on the vulnerable, and operating as a pyramid scheme.
Here are Krugman’s 12 best quotes on crypto over the past decade, slightly edited for length and clarity:
1. “People think it’s smart, even avant-garde, to create some kind of virtual currency whose creation requires wasting real resources in a way that Adam Smith considered foolish and old-fashioned in 1776.” (“Adam Smith Hates Bitcoin“) (April 12,2013)
2. “To be successful, money must be both a medium of exchange and a reasonably stable store of value. And it’s still unclear why bitcoin should be a stable store of value.” (“bitcoin is evil“) (December 28, 2013)
3. The cryptocurrency craze seems very strange, as it is going exactly opposite to the long-term trend. Instead of nearly frictionless transactions, we have high costs of doing business because transferring bitcoin or another unit of cryptocurrency requires providing a full history of past transactions. Instead of money created by a click of a mouse, we have money that must be mined – created by resource-intensive calculations.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic“) (July 31, 2018)
4. “Cryptocurrencies have no safety net, no connection to reality. Their value depends entirely on self-fulfilling expectations – meaning total collapse is a real possibility. If speculators were to have a moment of collective doubt, suddenly fearing that bitcoins were worthless, well, bitcoins would become worthless.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic“) (July 31, 2018)
5. “There could be a potential equilibrium in which bitcoin (but probably not other cryptocurrencies) would remain used primarily for black market transactions and tax evasion, but this equilibrium, if it exists, would be hard to achieve from here: once the dream of a blockchain future dies, disappointment will likely bring it all down.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic“) (July 31, 2018)
6. “Crypto has been effectively marketed: it manages to both look futuristic and appeal to old-school Goldbug fears that the government is inflating your savings, and huge past gains have attracted investors worried they’re missing out. So crypto has become a great asset class even though no one can clearly explain what it’s for.” (How Crypto Became the New Subprime) (January 27, 2022)
7. “I see uncomfortable parallels with the subprime mortgage crisis of the 2000s. No, crypto does not threaten the financial system – the numbers are not big enough to do that. But there is growing evidence that Crypto’s risks fall disproportionately on people who don’t know what they’re getting into and are ill-placed to handle the downsides.” (How Crypto Became the New Subprime) (January 27, 2022)
8. “Bitcoin plays out in a fantasy of self-sufficient individualism, protecting your family with your personal AR-15, treating your Covid with antiparasitic medicine or urine, and managing your financial affairs with money created in private, uncontaminated by institutions like governments or banks.”Guns, Germs, Bitcoin, and the Anti-Social Right“) (January 31, 2022)
9. “Cryptocurrencies play almost no role in economic transactions other than speculation in the crypto markets themselves. And if your answer is ‘give it time’, you should keep in mind that bitcoin has been around since 2009, which makes it old by technology standards; Apple introduced the iPad in 2010.” (“Crashing Crypto: is this time different?“) (May 17, 2022)
10. “If you believe, as I do, that crypto is largely a Ponzi scheme, this may be the time the scheme runs out of new suckers.” (“Wonking Out: Wasn’t Bitcoin meant to be an inflation hedge?“) (June 17, 2022)
11. “Jim Chanos then called crypto a ‘predatory dump.’ Well, I wouldn’t go that far. In fact, on second thought, I would.” (“Wonking Out: Wasn’t Bitcoin meant to be an inflation hedge?“) (June 17, 2022)
12. “The way I see it, crypto has evolved into a sort of postmodern pyramid scheme. The industry lured investors in with a combination of technobabble and libertarian derp; he used some of that cash flow to buying the illusion of respectability, which brought in even more investors. And for a time, even as the risks multiplied, it became, in effect, too big to regulate.”Crypto is crashing. Where were the regulators?“) (July 11, 2022)
Read more: The chief investment officer of a $1.5 billion firm explains how to invest in companies that profit from recessions – and shares the top 10 overlooked stocks that helped him beat the market this year