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The crypto crash is in full swing. Falls of 80–90% from the peak have already happened. What does this mean?

The economist Scott Sumner says “never reason from a price change”. The fact that a price changed is unarguable, but we need to know why it changed in order to understand what to do about it. As Scott says:

My suggestion is that people should never reason from a price change, but always start one step earlier — what caused the price to change. If oil prices fall because Saudi Arabia increases production, then that is bullish news. If oil prices fall because of falling AD in Europe, that might be expansionary for the US. …

About

Rob Knight

Founder, Mattereum

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