Nobel laureate Paul Krugman has joined the ranks of the world’s intellectuals and business moguls to give the thumbs up to cryptocurrency.
Last June, an American economist drew a parallel between the cryptocurrency craze and the real estate bubble of the mid-2000s, stating that consumer confidence in crypto assets is comparable to the enthusiasm in the US home market before the collapse.
Fast forward six months, Krugman compared crypto to Tesla and its stock.
On Tuesday, Krugman wrote an op-ed in the New York Times about Tesla, bitcoin, and the wildly volatile market.
In the article, he asks:
“Does Tesla’s story make sense?”
He added:
“Tesla and bitcoin may be more common than you think.”
Photo: IANS
Tesla Shares Down
Krugman’s statement came after Tesla shares fell 11.4% in response to reports that the company is reducing manufacturing production in China.
Between the first week of January 2020, and November 2021, Tesla’s stock price increased more than 13 times.
Since then, the stock has fallen 73%, reducing the electric car company’s market value from nearly $1.2 trillion to less than $350 billion as of Tuesday.
Krugman is an author and educator specializing in International Economics and Macroeconomics. He is a graduate of Yale University and the Massachusetts Institute of Technology.
Paul Krugman. Image: Bitcoin.com
Winner of the Nobel Prize in Economic Sciences, Krugman stated that Tesla is not like Apple and Microsoft and does not have the “network effect” of the tech giants.
The economist points out that both tech juggernauts and retail giant Amazon remain dominant because of “high network externalities.”
He claims that a significant part of Tesla’s appeal is due to the perception of CEO Elon Musk as a “cool guy,” but that perception has waned in recent weeks.
He even joked that he would never trust the billionaire to feed his cats.
Krugman also made a connection between the enthusiasm and confidence that fueled Tesla stock during the global health crisis of COVID-19 and bitcoin’s meteoric rise during the same period.
Crypto total market cap at $751 billion on the daily chart | Chart: TradingView.com
Thumbs down on Bitcoin
According to Krugman, cryptocurrencies are “buildings built on sand, but nothing.”
This year, the price of all cryptocurrencies has fallen, removing 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:
“Of course the same thing happened with Tesla, even though the company made something useful.”
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