Nobel laureate and noted economist Paul Krugman says the collapse of FTX could be the beginning of the end for the crypto industry.
In his New York Times column, Krugman wrote that the crypto industry could be headed for an “endless winter” as most digital assets fail to prove that they have real-life value.
“We are, many people say, going through a ‘crypto winter.’ But that may understate the case. Instead, this is looking more and more like Fimbulwinter, the endless winter that, in Norse mythology, precedes the end of the world – in this case, the crypto world, not just cryptocurrencies but the whole idea of organizing economic life around the famous ‘blockchain,'” said Krugman.
He noted that blockchains have yet to prove their utility, adding that many companies are reluctant to embrace the nascent technology.
Citing an example, Krugman says, “Five years ago, it was supposed to be a big deal – a sign of mainstream acceptance – when Australia’s stock exchange announced that it was planning to use a blockchain platform to clear and settle trades. Instead, it quietly canceled the plan two weeks ago, writing off $168 million in losses.”
“The original rationale for Bitcoin BTC/USD was that it would do away with the need for trust. So you wouldn’t have to worry about banks making off with your money. However, banks rarely steal their customers’ assets, while crypto institutions more easily succumb to the temptation,” he added.
Last month, Krugman expressed optimism about efforts to lower inflation, saying that a soft landing looks increasingly plausible.
“A good inflation report — core inflation for October only 3.6% annualized. Monthly data are volatile; still 6% over the past three months. But shelter accounts for more than half of that — and it’s a lagging indicator,” Krugman tweeted.
Photo: Courtesy of Commonwealth Club on flickr