Nobel Laureate Paul Krugman Calls Bitcoin ‘Total Bust’

Bitcoin’s dramatic selloff continues as the world’s biggest cryptocurrency wipes out all gains it has made since President Donald Trump’s re-election. Nobel laureate Paul Krugman, a City University of New York professor and Substack author, joins Bloomberg Businessweek Daily to discuss. Krugman’s most recent Substack post argues that Bitcoin and crypto could currently be seeing a legitimate “winter” due to political factors and asset hoarding. He also argues that if there’s going to be a Bitcoin collapse, it should happen now before it becomes too big and interconnected with other asset classes. Krugman speaks with Carol Massar and Tim Stenovec. Bitcoin tumbled below $61,000, as the unwinding of leveraged bets and broader market turbulence deepened a selloff that has wiped out all of the gains since President Donald Trump’s election set off a speculative rush into cryptocurrencies. 
The token sank as much as 4.8% to $60,033 in early Asia trade Friday, extending a sharp selloff to plunge to its lowest since October 2024. The rout has erased half of Bitcoin’s value since it reached a record four months ago and has spread to other tokens, related ETFs and companies like Strategy Inc. that hold vast sums of coins. The downturn has marked an abrupt retreat from Bitcoin’s meteoric rise through much of last year, when the return of the crypto-friendly Republican to the White House sent investors piling into such tokens and the Wall Street vehicles that have sprouted up around them. The market started cracking this month as rising geopolitical tensions sent tremors across global financial markets and curbed risk taking. That sparked Bitcoin’s precipitous decline from mid-January and set off a self-reinforcing cycle of selling as funds liquidated assets to meet redemptions and unwind leveraged bets.
“The fear and uncertainty across the market is evident,” said Chris Newhouse, head of business development at Ergonia. “Without conviction-based buyers willing to lean into the selling, each wave of ETF redemptions and liquidation cascades.” He said that’s “amplifying the magnitude of each leg lower and reinforcing the defensive positioning that’s keeping organic demand on the sidelines.” The slide has echoes of the one in 2022, when prices retreated sharply from the surge seen during the easy-money era of the pandemic as the Federal Reserve tightened monetary policy. It has already taken a toll on intermediaries like the exchanges Coinbase Global Inc., whose shares have tumbled more than 30% this year, and Gemini Space Station Inc., which said it plans to cut up to 25% of its workforce and wind down operations in the UK, European Union and Australia.
This time, Bitcoin and other cryptocurrencies are also seeing competition from other forms of speculation, like legalized sports gambling and prediction-market wagering on everything from politics to entertainment. At the same time, retail flow continues to chase zero-day options in equities and higher-yield crypto plays across decentralized exchanges.
The latest drop comes as digital assets face continued doubts about their real-world use, as well. Once touted as an inflation hedge or a rival to gold or the US dollar as a stable store of value, Bitcoin has continued to trade more like a high-risk asset and has failed to serve as a haven during times of financial market stress. In fact, its growing presence in institutional portfolios has at times made it more vulnerable to broad de-risking, particularly during bouts of volatility in tech equities and precious metals, like what has been seen in recent weeks.
“Momentum has taken over right now and crypto bear markets tend to end more in apathy than despair,” Ryan Rasmussen, director and head of research at Bitwise Asset Management. 
“We are currently in the despair phase of the drawdown,” he said. “That momentum has taken over.”

——–
Watch Bloomberg Radio LIVE on YouTube
Weekdays 7am-6pm ET
WATCH HERE: http://bit.ly/3vTiACF

Follow us on X: https://twitter.com/BloombergRadio

Subscribe to our Podcasts:

Bloomberg Daybreak: http://bit.ly/3DWYoAN
Bloomberg Surveillance: http://bit.ly/3OPtReI
Bloomberg Intelligence: http://bit.ly/3YrBfOi
Balance of Power: http://bit.ly/3OO8eLC
Bloomberg Businessweek: http://bit.ly/3IPl60i

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:
Apple CarPlay: https://apple.co/486mghI
Android Auto: https://bit.ly/49benZy

Visit our YouTube channels:
Bloomberg Podcasts: https://www.youtube.com/bloombergpodcasts
Bloomberg Television: https://www.youtube.com/@markets
Bloomberg Originals: https://www.youtube.com/bloomberg
Quicktake: https://www.youtube.com/@BloombergQuicktake

source