Bill Gates is one of the most prominent technocrats who refuses to buy into the frenzy around cryptocurrencies and digital assets like non-fungible tokens (NFTs). The Microsoft co-founder recently lambasted digital assets, reasserting his skepticism.
Speaking on an event on climate change by TechCrunch in the US, the billionaire philanthropist said that the assets were “100% based on greater fool theory”. He also took a jibe on the Bored Ape NFTs, saying that “expensive digital images of monkeys” will “improve the world immensely”.
Gates further added that he is “used” to asset classes, giving examples of a “farm where they have output” or a “company where they make products”. He confirmed that he is not involved with cryptocurrencies. “I’m not long or short any of those things,” Gates said.
What is the Greater Fool theory?
The Greater Fool theory implies the idea that the price of an overvalued asset will rise when enough investors are willing to pay larger amounts from the assets. This means that one can churn out a profit on an overpriced asset as long as they can be ahead to a “greater fool”. The way to make money works only till enough “fool” are there to buy into the overhyped value of an asset.
The price reaches a point where investors cannot deny that it is not in touch with reality. At this point, the asset would see a sell off in the market causing the price to plunge significantly, and to nothing in some cases.
Under this theory, people are lured into buying overvalued assets due to “biases in human behaviour”. Herd mentality can also contribute to the hype while people can suffer from FOMO or fear of missing out as they hear news of others reaping massive profits. Economist Burton Malkiel explained the effect in his book A Random Walk Down Wall Street.
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Meanwhile, the crypto slump continues
Heading the crypto meltdown, bitcoin plunged to a new 18-month low on Wednesday, falling by as much as 7.8% to $20,289, at its lowest since December 2020. Having lost around 28% of its value since Friday, it is down nearly 70% from its all-time peak of $69,000 that it registered in November 2021.
At the same time, a huge 88% drop in Google searches for “buying NFTs” was reported amid the ongoing crypto fall.
