According to Nobel Prize-winning economist Paul Krugman, there are many people out there likely getting rid of their crypto and trading it in for gold.
Paul Krugman Thinks Gold Is Outdoing BTC
The last 12 months have been marred by bad crypto activity. Bitcoin, for example, lost more than 70 percent of its value following its hike to $68,000 per unit in November of 2021, a new all-time high for the world’s number one digital currency by market cap. Many other assets followed suit and ultimately, the crypto space lost more than $2 trillion in valuation in just under a year.
However, the space was also hit by a lot of badly behaving companies and enterprises, a big one being FTX. Once considered the golden child of the crypto exchange arena, the company filed bankruptcy in November of 2022 and collapsed into a heap of fraud after it was alleged that it’s founder and head executive – Sam Bankman-Fried – had used customer funds to buy Bahamian real estate and to pay off loans for his other firm Alameda Research. He was later arrested and is now awaiting trial at his parents’ California home.
Krugman says these and other incidents have ultimately brought a lot of people’s faith in crypto down to a breaking point, and he thinks there are many traders and investors out there who have since turned their backs on BTC and gone to gold. He stated:
But investors are losing faith in fashionable technobabble. They still want their pet rocks, but crypto’s plunges and scandals are causing some of them to return to pet rocks with centuries of tradition behind them. That is, gold, the pet rock of ages.
Krugman also stated that at the beginning of 2022, several analysts were quick to assume bitcoin would become so huge and powerful, that the digital asset would wind up taking market share away from precious metals like gold, though he now feels the opposite could be occurring. He continued his interview with:
Is it possible that exactly the opposite has been happening? After all, bitcoin has lost more than two-thirds of its value since its peak in late 2021, and many much-hyped stocks such as (cough) Tesla have fallen from grace, but gold has hung in there, with its current price just a few percent off its 2020 peak.
It’s Fallen Due to Inflation
He also took issue with the idea that BTC was supposed to serve as a hedge against inflation. He says that not only has this not happened, but that as inflation has gotten worse, the BTC price has been horribly affected. He mentioned:
You might be tempted to say that investors are buying gold because they fear inflation, but that hasn’t worked for bitcoin, which was also supposed to be an inflation hedge.