It seems that the ongoing battle between supporters of gold and supporters of Bitcoin regarding the latter’s transformation into the new digital gold and its success as a tool and a means to hedge inflation at the expense of gold will not end.
Nobel laureate Paul Krugman (OTC:NEBLQ) believes that bitcoin may lose the battle against gold as the cryptocurrency scandals and crashes weaken faith in cryptocurrencies.
“The cryptocurrency scandals are helping drive a lot of investors away from the volatile Bitcoin and toward gold, one of the most important safe havens of all time,” said Nobel Laureate Krugman.
The Nobel laureate noted that gold prices have remained resilient even with the depreciation of the cryptocurrency and Tesla (NASDAQ:TSLA), which was one of the major investors in the popular cryptocurrency.
According to Krugman, bitcoin has lost more than two-thirds of its value since its peak in late 2021, but gold has maintained its gains since its peak in 2020.
Bitcoin is down more than 65% from its November 2021 peak of around $69,000, and is down nearly 38% over the past 12 months.
However, despite this, it has increased since the beginning of the current year 2023 by about 39%, and at the same time gold rose by about 4.4% in the past year, and it increased by 5% so far during 2023.
Lack of trust
Paul Krugman predicted that some investors might abandon bitcoin in favor of gold because the digital currency scandals stain confidence in digital assets, especially in light of the recent collapses that rocked the digital currency market.
Investors are leaning towards gold in part because the cryptocurrency sector has been shaken by high-profile crashes, according to Krugman, with the recent collapse of leading cryptocurrency exchange FTX eroding confidence in digital assets that were already suffering from a price drop.
Gold is better
The Nobel Prize-winning economist says prices of the precious metal have been more stable than bitcoin over the past year, though both have drawbacks with inflation soaring and the Federal Reserve raising interest rates aggressively.
Krugman said that cryptocurrencies remained high due to a mixture of fan enthusiasm for their advanced technology and liberal approach to dealing with money, but the famous economist indicated that investors began to lose confidence in modern technology and digital currencies.