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Krugman Warns Investors: Proceed with Caution on Tesla and Crypto Bubbles

• Nobel Laureate Paul Krugman has compared the cryptocurrency craze to the mid-2000s real estate bubble and Tesla’s stocks.
• On Tuesday, Krugman wrote an opinion piece in the New York Times regarding Tesla, bitcoin, and their massive market prices.
• He inquired: „Did the Tesla story ever make sense?“

Nobel Laureate Paul Krugman has been vocal in his opinion on the cryptocurrency craze, comparing it to the real estate bubble of the mid-2000s and, more recently, to Tesla’s stock prices. In June, the American economist noted that the enthusiasm consumers have for crypto assets is reminiscent of the enthusiasm that preceded the US housing market’s collapse. On Tuesday, Krugman wrote an opinion piece in the New York Times regarding Tesla, bitcoin, and their massive market prices.

Krugman began his article by pointing out that Tesla’s stock price had increased by more than 13 times since the first week of January 2020, only to drop 73% shortly thereafter. He then inquired: „Did the Tesla story ever make sense?“ He went on to explain that, from his perspective, Tesla and bitcoin may have more in common than one might think.

Krugman went on to explain the similarities between the two, noting that both are “asset bubbles driven by the belief that something new and wonderful has been created, and that it will make investors rich.” He continued to explain that both have seen “massive inflows of speculative money” and that both have yet to be proven as viable investments.

Krugman concluded his article by warning investors to be wary of both Tesla’s stocks and cryptocurrencies. He noted that “bubbles feed on themselves, and can survive for a surprisingly long time,” but that they eventually burst. He cautioned that investors should “proceed with great caution” when considering these investments.

Krugman is a notable author and educator who specializes in International Economics and Macroeconomics. He is a Yale University and Massachusetts Institute of Technology graduate, and the recipient of the Nobel Memorial Prize. His thoughts on the cryptocurrency craze serve as an important reminder to investors to be aware of the risks associated with speculating in such assets.