These are the most vulnerable investors as the crypto market goes down and bitcoin loses 50% of its value from its all-time high, according to Nobel laureate Paul Krugman.
Economist Paul Krugman, a Nobel laureate and a longtime crypto skeptic, said he is seeing “uncomfortable parallels” between cryptocurrencies and the subprime crisis of the 2000s.
Crypto isn’t big enough to cause an overall economic crisis, Krugman conceded. That said, he explained that the recent downturn, where the crypto market has lost about $1.3 trillion in market capitalization, equal to about 6% of U.S. gross domestic product, has had damaging effects on those who can ill-afford to risk big losses. “That’s an order of magnitude smaller than the effects of falling home prices when the housing bubble burst,” Krugman wrote.
As the crypto market goes down and bitcoin BTCUSD, -0.43% loses 50% of its value from its all-time high, Krugman said the losses are borne by minorities and financially disadvantaged groups, citing a survey that 44% of crypto investors are nonwhite, and 55% don’t have a college degree. “If you ask me, regulators have made the same mistake they made on subprime: They failed to protect the public against financial products nobody understood, and many vulnerable families may end up paying the price,” he wrote.
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