The New York Times economist Paul Krugman says that crypto investors need protection from themselves. He compares the subprime borrowers from 2008 to the current investors. Krugman notes there’s growing evidence that the volatility and the risks of cryptocurrencies are coming for those who don’t know what they got into.
Uninformed Participants Are Suffering the Most
Based on how individual investors are dealing with the current state of the market, Krugman makes a parallel with the 2008 crisis. On top of that, he adds the involvement of cryptocurrencies in money laundering schemes and tax evasion.
As a reminder, the subprime crisis of 2008 is considered a trigger for the global economic crisis of that year. Subprime refers to the below-average credit classification due to poor credit history.
Many subprime mortgages were created with a variable interest rate serviced by low repayments in the first few years that later came out as expensive. The subprime products were sold as mortgage-backed securities.
Unfortunately, once the subprime borrowers defaulted, the MBS market also took a hit.
On the other hand, today, people view crypto as a way out. Additionally, the investors see it as an escape from the system that’s made to work against them.
Naturally, some are in it for the tech, but others have not done their research. Finally, crypto offers hope, which is more than enough to risk investing in it.