Nobel laureate Krugman predicts eternal crypto winter

Last Updated: 5 December 2022

Nobel laureate Paul Krugman warns of an eternal crypto winter. The economist does not think crypto-currencies are going to do well yet.

Krugman is critical

The American Keynesian is known as a crypto-criticaster. This time, he writes an opinion piece in the New York Times arguing that there is no salvation for blockchain projects.

He cites several signs that he believes precede this winter. In the column, he mentions that the technology has no use – because there are other central alternatives that work just fine.

“What is the point?” Why go to the trouble and expense of keeping a ledger in many places, and actually updating that ledger every time a transaction takes place?”

To that, Krugman adds the demise of FTX and he thinks it would spell the end of “blockchain and cryptotechnology”. He compares it to the Fimbulwinter, a winter that, according to Scandinavian mythology, precedes the end of the world.

For Krugman, there have been several signs in recent months. The economist cites the recent write-downs made by several companies such as Maersk and the Australian Stock Exchange regarding their blockchain-based projects.

Inflation and proof-of-work

Krugman also openly criticises bitcoin’s existence. He argues that “banks rarely steal their customers’ assets, while crypto institutions easily succumb to temptation.”

The narrative that bitcoin protects against inflation? Krugman does not go along with that: “Extreme inflation that destroys the value of money generally only happens in political chaos.”

Finally, Krugman is strongly opposed to proof-of-work. According to him, it damages the environment without producing value.

In June, he compared cryptocurrencies to the housing bubble and the subprime mortgage crisis, saying, “It’s a house built not on sand, but on nothing at all.”


All in all: Criticism from Keynesian quarters is nothing new. The importance of decentralisation, censorship resistance and neutral money is difficult for some to understand, especially if you are steeped in the opposite system with central planning, central banks and political mandates.

Small problem in Krugman’s thinking: he lumps together blockchain, crypto and bitcoin. And thereby overlooks bitcoin philosophy when he compares it to FTX as a central exchange.

And proof-of-work? That is a wonderful mechanism that (in combination with other techniques) solved the double spending problem for the first time ever, secures a decentralised network and links scarcity from the digital to the physical world (through mathematics).


  • Ivan came across the topic of cryptocurrencies in early 2016 and, as an author and enthusiast, has been intensively involved with the topics of cryptocurrencies, blockchain and STOs ever since.

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