Paul Krugman’s Theory Why Gold Holds Up Better Than Bitcoin, Tesla

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Crypto scandals are helping to steer some investors away from bitcoin and into gold, Paul Krugman says. The Nobel laureate noted that gold prices have held up even as the value of crypto and Tesla have fallen. A loss of faith in “fashionable tech chatter” is contributing to demand for “the pet rock of the ages”, he suggested. LoadingSomething is being loaded.

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Some investors may ditch bitcoin in favor of gold as crypto scandals tarnish confidence in digital assets, Paul Krugman has suggested.

The Nobel Prize-winning economist noted that prices for the precious metal have been much more stable than those of bitcoin over the past year, although both have downsides as inflation rises and the Reserve federal government is aggressively raising interest rates.

In an op-ed for The New York Times, Krugman said cryptocurrencies have been kept in the air thanks to a combination of fan enthusiasm for its cutting-edge technology and a libertarian approach to money.

“But investors are losing faith in fashionable tech chatter,” he said in the commentary posted on Sunday.

“They still want their pet rocks, but the crypto plunges and scandals are causing some of them to go back to pet rocks with centuries of tradition behind them, i.e. gold, pet rock ages”.

Krugman was explaining recent comments by JPMorgan CEO Jamie Dimon who described cryptocurrencies as a pet because they cannot be used as a medium of exchange, i.e. there is no There aren’t many stores and other places where you can directly hand over crypto and get something in return.

Krugman himself has repeatedly trashed bitcoin and other cryptocurrencies in the past, calling them useless, useless, and valuable solely due to hype and speculation.

In early 2022, a Goldman Sachs analyst predicted bitcoin would take market share from gold, the City University of New York professor noted.

“Is it possible that the exact opposite happened? he asked in the editorial.

“After all, Bitcoin has lost more than two-thirds of its value since peaking in late 2021, and many high-profile stocks such as (coughs) Tesla have fallen out of favor, but gold has held on, with its current price. within a few percent of its 2020 peak,” Krugman said.

Bitcoin has fallen more than 65% from its November 2021 peak of around $65,000, and is down nearly 38% in the past 12 months, although it is up around 39% this year so far. Meanwhile, gold is up around 4.4% over the past year and is up more than 5% year-to-date.

Investors are turning to gold in part because the crypto sector has been rocked by high-profile crashes, according to Krugman. The recent implosion of leading crypto exchange FTX has severely eroded confidence in digital assets which were already suffering from falling prices.

And while rising interest rates generally affect demand for gold, precious metal prices are surprisingly robust, he said, unlike those of crypto stocks, Tesla and even. The theory is that high interest rates will lower demand for gold because people are more attracted to high-yielding investments elsewhere, such as bonds.

“You might be tempted to say that investors buy gold because they fear inflation. But that didn’t work for bitcoin, which was also meant to be an inflation hedge,” he said. Krugman.

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