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Crypto Terms:  Letter T
Jun 19, 2023 |
updated Apr 02, 2024

What is The Greater Fool Theory?

The Greater Fool Theory Meaning:
The Greater Fool Theory - states that no matter how overvalued an asset is, there will always be someone to buy it.
1 minute

Let's find out The Greater Fool Theory meaning, definition in crypto, what is The Greater Fool Theory, and all other detailed facts.

The Greater Fool theory was first introduced by professor Burton Malkiel, who observed that people are usually attracted to assets that are increasing in price. Thus, he hypothesized that an investor could continue buying overpriced assets yet still make money. This behavior comes from inherent human biases and the herd mentality where the success of others inspires people to try their own luck in the same area. 

The Greater Fool theory can also be applied in the crypto sector.

A real-life example of the Greater Fool theory can be seen through digital assets like memecoins such as Dogecoin, Dogelon Mars, and Shiba Inu. The overwhelming success of the coin holders continues to draw in many desperate investors who believe they can become the next multi-millionaire. 

Desperation for success can make people purchase coins that are obvious scams. For instance, the “Squid Game” coin that was derived from a popular South Korean TV series. In this case, the value of the coin sunk from over $2000 dollars per coin to zero.

In essence, the person referred to as the “greater fool” is the one person that will buy the overvalued asset.