Is Crypto worthy enough to be compared to the Recession Crisis of 2008?

A well-known economist put up his opinion and views about cryptocurrencies and how they may affect just like the subprime mortgage crisis did

Cryptocurrencies have always distributed opinions and views among influential individuals experts in fields like economists or general investors. Every field is found to have different thoughts about digital assets, their practical usage, or from an investing point of view. 

Paul Krugman on Cryptocurrency 

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Recently economist Paul Krugman put up his thoughts about cryptocurrencies. While doing that, he compared it with the subprime mortgage crisis and, at some point, considered both of their equivalents. He started his opinions with his take: if the Stock market is not an economy despite holding huge capital investment, then cryptocurrencies could never be an economy at all.

However, he claimed it to have some assets value by which it reached up to $3 trillion market value. Still, he also mentioned losing the global cryptocurrency market by approx 48% of its value, which is almost $1.3 trillion, in terms of market capitalization. Paul did not consider this a massive loss by comparing it; if it would be an economic loss, then it would be only 6% of the total GDP of the US.

Later on, Paul puts up crucial views on Crypto, comparing it with the 2008 subprime crisis based on facts and data. Although in comparison, he didn’t consider the crypto loss to be as much as the recession was, he considered it to take the same paths as the subprime crisis unfolded. In 2008, middle and working classes were primary sufferers; the economist indicated the same scenario reflecting with Crypto and its investors. 

Comparison of Subprime Mortgage crisis and Cryptocurrencies

Paul picked up data from reports and stated that most crypto investors belong to the working class and are undergraduates or don’t have a college degree. Opinionated that most crypto investors either don’t have investment knowledge, be it risk assessment diversifying portfolio or are not in a situation of financial stability needed before investing, and sometimes they lack both. 

Most crypto investors belong to those categories having aspirations to get rich or attain financial freedom that they could not attain while working their whole life. People have aspirations to have their own house without proper knowledge of how a high-interest rate will affect them, they put on their capital, and when the recession hit, they were among the loss bearers. 

Various individuals different take on Crypto

For instance, famous investor and billionaire Warren Buffet stated that if you’re buying something, it should have an actual value in terms of producing anything, but in the case of cryptocurrencies like Bitcoin, you don’t get anything in actual; still, you buy only with the hope that someone else will buy that from you in future for a higher price. 

On the other hand, business tycoon and venture capitalist Mark Cuban thinks that investors should be interested in any utility in the project. Ten years from now, Crypto investors might have their potential place in the economy. 

What both proponents and opponents of Crypto miss out

A common understanding could be developed considering Crypto to be just another means of exchange and transaction or trading, although with high risk and volatility. That, too, is the result of no proper regulations, and still, very few people believe in it. Depending on which side you are standing on, it can be profitable or a loss-maker.

There’s also a need to understand that it’s evident that people with a low credit score and average financial situation are more into investing, but why is that? What’s the driving force leading them towards it, even with many involved risks. They hope to get better financial stability to improve their lives. The solutions should focus on how regulations can be made and withdrawn so that it doesn’t snatch the chance of investing from ordinary investors; instead, they should provide them facilities and safeguard their capital.

Keeping this aside, Crypto isn’t only holding economic values. It has a lot more than that related to tech like Blockchain, which further developed, innovated Smart contracts, DeFi like smart solutions, and still developing grounds for Web 3 and Metaverse projects.