Paul Krugman Sees Bitcoin, Crypto as Useless, Wasteful, Ponzi Scheme

• Paul Krugman has been a sharp critic of bitcoin and other cryptocurrencies for at least a decade.
• The Nobel Prize-winning economist has called them pointless, wasteful and practically worthless.
• Krugman has also dismissed crypto as mainly a tool for criminals, and largely a Ponzi scheme.

Paul Krugman has repeatedly criticized bitcoin and other cryptocurrencies, dismissing them as useless, wasteful, 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 vulnerable people and operating as a pyramid scheme.

Here are Krugman’s 12 best quotes about crypto over the past decade, lightly edited for length and clarity:

1. “People think it’s smart, nay groundbreaking, to create some kind of virtual currency whose creation requires wasting real resources in a way that Adam Smith considered foolish and outdated in 1776.”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 is still completely unclear why bitcoin should be a stable store of value.” (“Bitcoin is evil”) (December 28, 2013)

3. The enthusiasm for cryptocurrencies seems very strange, because it goes exactly against the long-term trend. Instead of nearly frictionless transactions, we have high costs of doing business, because transferring a bitcoin or other cryptocurrency unit requires providing a complete history of past transactions. Instead of money created with the click of a mouse, we have money that must be mined – created through resource-intensive calculations.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic”) (July 31, 2018)

4. “Cryptocurrencies have no backstop, no tether to reality. Their value depends entirely on self-fulfilling expectations – meaning total collapse is a real possibility. If speculators were to have a collective moment of doubt, suddenly fearing that bitcoins were worthless, well , bitcoins would become worthless.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic”) (31 July 2018)

5. “There may be a potential equilibrium where bitcoin (but probably not other cryptocurrencies) remains in use mainly for black market transactions and tax evasion, but that equilibrium, if it exists, would be difficult to achieve from here: once the dream of a blockchain future dies, the disappointment is likely to collapse the whole thing.” (“Transaction Costs and Tethers: Why I’m a Crypto Skeptic”) (31 July 2018)

6. “Crypto has been effectively marketed: It manages to both seem futuristic and appeal to old-school gold bug fears that the government will blow up your savings, and huge past gains have attracted investors worried about missing out. So crypto has become a major asset class even though no one can clearly explain what legitimate purpose it is for.” (How Crypto Became the New Subprime) (January 27, 2022)

7. “I see uncomfortable parallels with the subprime crisis of the 2000s. No, crypto does not threaten the financial system – the numbers are not large enough to do so. But there is growing evidence that the risk of crypto falls disproportionately on people who don’t know what they’re getting into and are ill-placed to deal with the downsides.” (How Crypto Became the New Subprime) (January 27, 2022)

8. “Bitcoin plays into a fantasy of self-sufficient individualism, of protecting your family with your personal AR-15, treating your Covid with an antiparasitic drug or urine, and managing your financial affairs with privately created money, untainted by institutions such as governments or banks.” (“Guns, Germs, Bitcoin and the Antisocial Right”) (31 January 2022)

9. “Cryptocurrencies play almost no role in financial transactions other than speculation in the cryptomarkets themselves. And if your answer is ‘give it time’, keep in mind that bitcoin has been around since 2009, making it ancient by technical 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 just happen to be the moment when the scheme has run out of new suction cups.” (“Wonking Out: Wasn’t Bitcoin Meant To Be A Hedge Against Inflation?”) (June 17, 2022)

11. “Jim Chanos went on to call crypto a ‘predatory junkyard.’ Well, I wouldn’t go that far. In fact, on second thought, I would. (“Wonking Out: Wasn’t Bitcoin Meant to Be a Hedge Against inflation?”) (June 17, 2022)

12. “The way I see it, crypto evolved into a kind of postmodern pyramid scheme. The industry lured investors in with a combination of technobabble and libertarian derp; it used some of that cash flow to buy the illusion of respectability, which brought in even more investors.” And for a while, even though the risk multiplied, it actually became too great to regulate.” (“Crypto is crashing. Where were the regulators?”) (July 11, 2022)

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