Twelve years ago, economist and Nobel laureate Paul Krugman expressed his initial skepticism towards Bitcoin, a viewpoint that would ultimately become one of the costliest missed opportunities in financial history. Krugman’s now-famous article, published in The New York Times on September 7, 2011, saw him criticize and dismiss the cryptocurrency, which was then trading at an average of $7.03 per Bitcoin across exchanges.
Today, Bitcoin’s incredible journey has underscored the inaccuracy of Krugman’s doubts, as highlighted in a recent post by Bitcoin Historian Pete Rizzo. Back when Krugman penned his article, Bitcoin was still in its infancy, with a relatively obscure presence among a small, passionate community of early adopters and tech enthusiasts.
Krugman’s argument centered on Bitcoin being a bubble destined to burst. He questioned its suitability as a currency, criticized its decentralized nature, and cast doubts on its long-term viability. At the time, the $7.00 price tag appeared insignificant, and many shared Krugman’s reservations.
However, history has definitively proven Krugman and other early Bitcoin skeptics wrong. Over the past 12 years, Bitcoin has not just survived but thrived, witnessing unprecedented price growth, including highs of over $69,000 in early 2021. At the time of writing, Bitcoin is trading at approximately $25,000 per coin, representing an astonishing 365,999% increase from its price when Krugman voiced his skepticism.
“The dollar value of that cybercurrency has fluctuated sharply, but overall it has soared. So buying into Bitcoin has, at least so far, been a good investment. But does that make the experiment a success? Um, no. What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin.”
It’s worth noting that Krugman did acknowledge Bitcoin’s attractiveness as an investment, even as he questioned its potential as a currency. He pointed out its deflationary nature and the tendency for people to hoard it rather than spend it.
Nonetheless, Bitcoin’s continued utility as a currency and its adoption in various real-world scenarios, such as in El Salvador alongside the U.S. dollar, have contradicted Krugman’s claims. Bitcoin’s rise to $25,000 demonstrates its ability to facilitate cross-border value transfers with relative ease.
Even 15 years on, Bitcoin maintains a niche in online commerce. In hindsight, Krugman’s dismissal of Bitcoin at $7 serves as a potent reminder of the unpredictability of financial markets and the transformative potential of groundbreaking technologies in reshaping the world. Continue Reading
Source: Bitcoin Magazine
