Krugman Warns of Crypto Volatility: Tesla Stock Plunges 73%

• Nobel Laureate Paul Krugman has compared the cryptocurrency craze to the real estate bubble of the mid-2000s.
• Krugman has also compared the crypto to Tesla and its stocks, inquiring “Did the Tesla story ever make sense?”
• Tesla’s stock price has dropped 73% in response to reports of the company reducing its manufacturing output in China.

Nobel Laureate Paul Krugman has been vocal in his criticism of the cryptocurrency craze. Having compared the newfound enthusiasm for crypto assets to the real estate bubble of the mid-2000s, Krugman has now drawn parallels between crypto and Tesla and its stocks.

On Tuesday, he wrote an opinion piece in the New York Times regarding Tesla, bitcoin, and their massive market prices, inquiring: “Did the Tesla story ever make sense?” He added: “Tesla and bitcoin may have more in common than you think.”

Krugman’s remarks came after Tesla’s stock fell 11.4% in response to reports that the company reduced its manufacturing output in China. This sudden dip in stocks is indicative of the volatility of the market, as Tesla has had a period of exceptional growth in the past year.

Between the first week of January 2020, and November 2021, Tesla’s stock price increased by more than 13 times. This increase in market valuation saw Tesla become the world’s most valuable carmaker, as its market capitalization surged to almost $1.2 trillion. However, since then, the stock has dropped 73%, reducing the market valuation of the electric car firm from almost $1.2 trillion to less than $350 billion as of Tuesday’s close.

Paul 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 was awarded the Nobel Memorial Prize in Economic Sciences in 2008. His opinion is highly respected among the intellectual and business community, and his skepticism towards cryptocurrency has been shared by many.

Krugman’s warnings about the cryptocurrency market may prove to be prescient, as Tesla’s stock decline is a stark reminder of the volatility of the market. While it is impossible to predict the future of crypto assets, Krugman’s cautionary advice should not be taken lightly.