Bitcoin and the Greatest Fool Theory

The longer Bitcoin stays alive, secure and decentralized, the foolisher it is to dismiss it out of hand.

Of all the arguments brought forth against Bitcoin, none is as persuasive as the Greater Fool Theory. I hear it all the time. Especially if one of my videos on the German channel goes viral and reaches a wider audience of normies who haven’t thought a lot about Bitcoin.

The Greater Fool Theory is an investment strategy that suggests that an asset's value will continue to rise because a greater fool will be found to buy it at a higher price. This theory is often applied to speculative investments, such as stocks, real estate, or art, where the value is not based on intrinsic worth but on the expectations of future buyers. In essence, it's a belief that there will always be someone else who will pay an even higher price for an asset, regardless of its actual value. This theory often leads to asset bubbles and eventual crashes when the bubble bursts and the greater fool can no longer be found. - Venice AI

Sure, at first glance this applies perfectly to Bitcoin.

That’s why it’s so persuasive to use it as a “good” reason to dismiss Bitcoin.

Bitcoin doesn’t have “intrinsic value”. It doesn’t pay a cash flow (like stocks, bonds or real estate). Therefore it must be a fools game where one fool sells it to an even foolisher fool at a higher price.

You know, like art.

Or gold.

Or silver.

Or stocks.

Or bonds.

Or real estate.

Nothing has intrinsic value. It just doesn’t exist. Like beauty, value is always in the eye of the beholder. And if you buy any of these asset classes as assets because “Number Go Up”, you’re fooling yourself if you think you’re not also taking part in a greater fool game.

For art it should be obvious. For gold as well, a 16 trillion Dollar market.

Real estate? Yes people live in houses and pay rent. But as long as our money doesn’t serve as a store of value, this “asset class” is heavily distorted. Same goes for stocks and bonds. No-one knows how high the monetary premium in these markets is.

This is of course not an argument against stocks, bonds or houses. I get why people would buy those. But today all of them are heavily bought with the intention of selling them on to a “greater fool”.

The same absolutely goes for gold, art, old cars and rare basketball cards. Anything scarce is turned into a store of value today.

In this world, only the greatest fool would dismiss Bitcoin, an asset purposely built to store wealth in your head.

Especially given the fact that Bitcoin has shown its resilience and appeal over 15 years now and has been acknowledged by mainstream finance, politicians and even nation states.

The longer Bitcoin stays alive, secure and decentralized, the foolisher it is to dismiss it out of hand.

Till next time,

Niko