Suppose there was a massive crypto crash, is it really that bad? No, that’s not it.
Relatively speaking, hey. Because it does have consequences. But if we compare it to the crisis in 2007, which caused a massive recession, a possible crypto crash is ‘peanuts’.
crypto crash
Certainly after the digital currencies have recently taken a hit, the discussion is flaring up again. Paul Krugman is an economist and willingly participates. The man is not the first one, because he won the Nobel Prize in 2008. In a new column in the New York Times he talks about the crypto market. He compares the current crypto situation with that of the recession in 2007. That crisis started because people could get mortgages, which they (ultimately) could not pay. These were the so-called ‘subprime mortages’. Mortgages are therefore for people with less money, but with a higher interest rate. This results in significant risks and that bubble burst.
The Nobel laureate now sees parallels with then. Because according to him, many crypto buyers do not see the risks and they certainly do not know because such a coin can (underlying value). Missing an opportunity (FOMO) is at the root of this. Another risk that Krugman sees is that again many people buy digital coins who have little money.
Not that bad
However, the comparison does not quite hold. And the economist sees that too. This is because the crypto market as a whole is much smaller than the mortgage market at the time. A mega-crash will have consequences, but not such global effects as then. Nevertheless, the risk does increase. Now that more people are investing and crypto prices are more linked to stock prices.
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