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- Cryptocurrencies have grown organically since their inception around the time of the financial crisis and have gained global acceptance over the last year
- Krugman denounces such currencies as they do not benefit the social-economical landscape due to its volatility
- He further believes other digital payments like Venmo and NowPayments provide more use cases
It is very rare for a Nobel Laureate in Economic Sciences to have a differing opinion from the majority in a hot topic of discussion like cryptocurrencies and Bitcoin. Paul Krugman believes that new investors are entering the market after viewing the profits of their predecessors.
Krugman terms it as ‘get quick rich’ and hence no better than Ponzi Schemes. The New York Times columnist has compared cryptocurrencies to the gold standard in one of his published articles. It received backlash from quite a few educationists and scholars who believe in the value of cryptocurrencies.
However, cryptocurrencies are regulated in a better way off late that protects investors from fraud and losses. Although placed under the high risk category of asset classes, it is being globally accepted by individuals as well as organizations.
Crypto’s are only for profit making is a myth
Many believe that cryptocurrencies are only for the rich as one needs large sums of money to invest. Furthermore, word has spread that cryptocurrencies cannot be used as a long term investment tool or medium of payment due to its volatility.
The beliefs are a myth as cryptocurrencies can be bought in fractions and give diversification benefits to investors. It is volatile in the short term but retail investors do have the option to sell them at a higher price just like a normal security.
Krugman illustrates that cryptocurrencies are used only for price speculation but blockchain networks like Ethereum offer financial services and a marketplace for NFTs. A lot of myths surrounding cryptocurrencies are yet to be busted which will clear the air for new entrants.
Shaping the future with better regulations
It is true that until the turn of the decade cryptocurrencies were poorly regulated which is a major concern for Krugman and other economists. The absence of regulations have led to millions being lost to anonymous attacks and cyber cell crimes.
Regulations in various countries have set the tone for digital currencies to move ahead. The IRS in the US has ordered reporting of transactions above $10000 to them. South Korea is poised to impose heavy capital gains tax on cryptocurrencies.
Regulatory authorities are gauging the investor sentiments and taking a calculated risk of implementing such bans. Investors have drawn an ire to such policies as it hurts the very existence of cryptocurrencies.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
