When does the greater fool theory apply?

In the stock market, the greater fool theory applies when many investors make a questionable investment, with the assumption that they will be able to sell it later to "a greater fool".

Is the greater fool theory a Ponzi scheme?

But the whole mechanism is a kind of Ponzi scheme where more and more credulous investors must be found to buy the stock from the earlier investors. Eventually, one runs out of greater fools. In real estate, the greater fool theory can drive investment through the expectation that prices always rise.

Is cryptocurrency a greater fool?

Cryptocurrencies have been characterized as examples of the greater fool theory. Numerous economists, including several Nobel laureates, have described cryptocurrency as having no intrinsic value whatsoever.

Why do Bitcoin prices go up?

But bitcoin doesn’t work off of any such fundamentals. Its price swings are due to investor sentiment only. It’s based on the Greater Fool Theory, which states that prices go up because people are able to sell overpriced assets to a “greater fool.” That’s it in a nutshell.