Example of the Greater Fools Theory

Greater fool theory states that investors can achieve positive returns by buying an asset without concern for valuation fundamentals because someone else will buy it at a higher price.

Investors employing this theory may think assets that they are purchasing are overvalued based on fundamentals or long-term performance outlooks, but they still expect to make a profit because another investor (the “greater fool”) will be willing to pay even more.

Bitcoin is great in theory, but in reality it is just a speculative investment.

In college, I did a research paper on the “greater fool” theory. It was interesting to study international and local cases when people openly hoped for another person’s stupidity, for example, tulip fever. Many have lost their homes, livestock, and all assets in general just for the sake of buying flowers. Absurd. In fact, any sphere where money is spinning can eventually become a bubble or an area for “greater fools”. It is essential to correctly assess economic indicators and trade on good exchanges like xerof.com. But I don’t think people will ever get smarter.