A Nobel Prize laureate by the name of Paul Krugman recently claimed that cryptocurrency is, in essence, a Ponzi scheme that has been operating for a long time and can continue to operate over the course of the next couple of decades.
Simply put, a Ponzi scheme refers to a specific type of fraud during which there is a belief in the continued success of a seemingly non-existent enterprise. This belief is then fostered through quick return payments towards the initial investors, which had been generated by money that had been put into the scheme by the later investors.
Krugman targets crypto
Krugman had previously shared his disdain for cryptocurrency in the past, but the more immediate negativity is focused around the abovementioned likening of cryptocurrency to that of a Ponzi scheme. He went on to state that much like the pyramid scheme related to fraud of the past century, cryptocurrency is a business model which will not last and is only creating the illusion of being sustainable.
When asked about how a Ponzi scheme could last for such a long time, Krugman replied by citing the example of Bernie Madoff and how his scam was operational for nearly two decades and may have even been operational for a much longer time had the financial crisis not put a stop to it.
Furthermore, Krugman also compared cryptocurrencies to that of gold, saying that while it is feasible that crypto could theoretically compete with gold and achieve about the same levels of longevity, it is nevertheless very likely that the government will be forced to heavily intervene and adopt severe measures at some point much like how it had previously done with gold during the 1930s.
Others may share the same opinion
Krugman is not alone in his assessment of crypto, as Dave Portnoy (a day trader for the legacy market) also previously stated that cryptocurrencies are a Ponzi scheme as well. For Dave, his reasoning rested on the lack of accountability for Bitcoin as the creator Satoshi Nakamoto remained anonymous.
It should, however, be mentioned that despite Portnoy’s recorded history with Bitcoin and cryptocurrencies, with him actually being a BTC investor in the past, he has nonetheless since stated that cryptocurrencies are not a Ponzi scheme as he had once presumed and thus in doing so, he admitted that his initial comments were wrong.
As of the time of this writing, BTC is trading at $40,986, a 2.8% increase in price within the last 24 hours.