Paul Krugman: “This Bitcoin (BTC) crash reflects eroding trust and politicization”

JH Kim

Summary

Paul Krugman said the recent plunge in Bitcoin prices is not a simple correction but the result of eroding trust and politicization.
He said that in the past, faith in Bitcoin rooted in libertarian ideology helped defend prices during downturns and provided the basis for recoveries.
However, he said that as Bitcoin has become a political product, the ideology-based price-support mechanism is unlikely to function, making it difficult to expect a rebound similar to past episodes.

Paul Krugman, a Nobel laureate in economics and a professor at the City University of New York, recently said the latest plunge in Bitcoin (BTC) prices is different in nature from past episodes. He argued that the decline is not a simple market correction but the result of eroding trust surrounding Bitcoin and its politicization.

According to cryptocurrency-focused outlet U.Today on the 6th (local time), Krugman wrote on his blog that “Bitcoin’s rise has largely been driven by political factors,” adding that “the current crash is a sign that this political trust is being shaken.”

He cited libertarian ideology as a key reason Bitcoin was able to recover even after steep price declines in the past. Krugman said, “Previously, ideological conviction among Bitcoin supporters helped defend the price during downturns,” explaining that “many participants shared faith in Bitcoin, and that became the foundation for a rebound.”

However, he said that framework is becoming difficult to sustain. “Bitcoin has now become a political product,” Krugman said, adding that “the ideology-based price-support mechanism is unlikely to work anymore.”

He continued, “This adjustment phase is showing a different pattern from past cyclical declines,” and added, “It does not look easy to expect a rebound in the same way as before.”