Bitcoin’s sharp drop… Nobel economics laureate Krugman warns it “exposes structural limits”

As Bitcoin (BTC) slipped below the $63,000 level, the broader digital-asset (crypto) market downturn is deepening. With leveraged-position liquidations colliding with rising volatility in global financial markets, virtually all of the gains that had accumulated since Donald Trump’s election as U.S. president last year have now been wiped out. That has prompted warnings that this slide may be more than a routine pullback and could mark the beginning of a breakdown in confidence.

On the 5th (local time), Paul Krugman, a Nobel Prize–winning economist and professor at the City University of New York (CUNY), told Bloomberg in an interview that “this decline is different in character from the past,” pointing to Bitcoin’s structural constraints.

“Bitcoin’s value is inherently intangible, and until now it has been propped up by conviction, ideology and collective belief,” Krugman said. “But the recent rally was driven less by trust in Bitcoin itself than by political expectations and large-scale accumulation strategies by companies such as Strategy.” He added that “those factors are far more fragile” and that “once it turns, it’s hard to recover.”

He also cited Bitcoin’s failure to function as a safe haven as a key element of this downturn. “With doubts growing about U.S. politics and fiscal stability, the real safe haven ultimately was gold,” he said, adding that the narrative of Bitcoin as “digital gold” has lost traction in this phase.

Political variables are also weighing on the market. “Recently, Bitcoin’s price has effectively been moving in tandem with Trump’s political standing,” Krugman said. “Contrary to the old narrative that Bitcoin is a decentralized asset, it has now become closer to a political asset.”

While some in the market have floated the possibility that the U.S. government could rescue the digital-asset industry, the prevailing view is that it is unlikely. “Bitcoin’s market is still about $2.5 trillion,” Krugman said. “Bailing it out would require enormous public funds, and the political backlash would be hard to absorb,” he added, drawing a line under the idea.

“It would be better for a correction to come before the digital-asset industry gets too big,” he said. “This is a moment when market participants are asking again what Bitcoin is actually an asset based on.”

He also expressed skepticism about Bitcoin’s price outlook. “Bitcoin has no earnings, cash flow, or service value,” he said. “Its price outlook is ultimately just a bet on belief—and right now that belief itself is wobbling.”