• About
  • Advertise
  • Write For Us
  • Privacy Policy
  • Contact Us
Subscribe
Smart Investor Malaysia
Advertisement
  • Start Here
    • All
    • Guides
    • How-Tos
    • Analysis

    PropertyGuru: Malaysian Residential Property Market Continues To Face Challenges As Supply And Demand Declines

    Fed Turns The Tide In War On Inflation, But It’s Too Early To Declare Victory

    The Smart Investor’s Guide to Insurance

    Highlights: Malaysia’s Revised Budget 2023

    4 Reasons Why You Need To Invest In ETF

    SPY vs SPUS: A 2023 Comparison of S&P 500 ETFs

    It's time to embed ESG into your investment portfolio. | Credit: nattanan23 via Pixabay

    The Smart Investor’s Guide to ESG

    (L-R) Kenny Yee, Head of Research and Thong Pak Leng, Vice President of Equity Research

    Post 2023 Budget And Q4 Market Outlook Commentary By Rakuten Trade

    Image by dashu83 on Freepik

    Why This Economic Cycle Is Different?

    • Guides
    • How-Tos
    • Analysis
  • Investments
    • All
    • Asset Management
    • Stocks
    • Islamic Finance
    • Alternatives Investments

    Malaysia’s dance with FAANG Giants

    AIIMAN menjalin pakatan strategik dengan Bank Islam sebagai Rakan Pengedar Untuk Luaskan Capaian Kepada Produk Kekayaan Syariah

    E-mail Popup Warning Window Concept

    ICMR Research Series: Safeguarding Malaysian Investors Against Financial Scams

    How Is The Malaysian Property Industry Doing Post-Covid?

    What Can We Learn From The “Equity Risk Premium” About The Prospects For Equities Vs Bonds

    SC-Bursa: Measures To Boost Capital Market Vibrancy And Competitiveness

    Still Worth Investing In Sustainability In 2023?

    ICMR Research Series: Unexpected Life Situations And Industry Issues Drive Vulnerability For Malaysian Investors

    Bursa Malaysia Expands “Approved Securities” Criteria To Boost Market Vibrancy

    • Asset Management
    • Stocks
    • Islamic Finance
    • Alternatives Investments
  • Personal Finance
    • All
    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance

    Trust In Transition: Ensuring Legacy Security Amidst Blended Family Dynamics

    Property Tussle: Being Left Homeless After Sister’s Death

    Employment Opportunity Fraud Syndicate: Lidt Cooperation Advertising Sdn Bhd Or Lidl Cooperation Advertising Sdn Bhd

    What You Need To Know About The Insurance Industry In Malaysia

    5 Rules For Malaysians To Improve Their Financial Wellbeing

    Tears In Heaven: Who Protects Your Insurance Money?

    Patterns And Types Of Cybercrime In Malaysia From 2016 To 2021: Part 2

    Patterns And Types Of Cybercrime In Malaysia From 2016 To 2021: Part 1

    ICMR Research Series: Millennials And Gen Z Must Plan Early For A Better Retirement In A Changing World Of Work

    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance
  • Enterprise
    • All
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    From left Eizzar Supiar, AVP - Evaluation, Cradle_ Adlin Yusman, Co-Founder of BeMalas_ Suthenesh Sugumaran, Co-Founder of BeMalas_ and Joyce Wee, Former Executive Director of Etalage

    Cradle Circle: Bridging Visionary Startups and Investors in Second Series Event

    Gorgeous Geeks Marks 15 Years of Empowering Women in Technology

    MDDA Celebrates 30 Years of Industry Excellence

    DNA Mapping, A Revolutionary Medical Breakthrough

    Thomson Ushers In New Treatment for Spinal Muscular Atrophy

    Authority Institute’s Maverick Foo named Vistage Malaysia’s Speaker of the Year

    Digital Niaga Empowers Local Businesses With Digital Access To Financial Solutions for Micro, Small Medium Enterprises’ (MSMEs)

    Bizsu: On A Mission To Cool Down The World And Save The Environment

    Management team of Web Bytes Sdn Bhd (from L-R) at the Launch of Xilnex Retail Tech Experience Center: Ng Tiong Kuan, COO; Lee Ming Kew, CFO; Ooi Boon Sheng, CEO; Eng Aik Kian,  CTO (far right); Tan Wei Kit, Business Development Director (2nd from right) with Lee Kah Hin Jerry, Chief Investment Officer of GD Express Bhd (4th from right) and Ken Phua, Deputy President of MRCA (3rd from right)

    Web Bytes Unveils Wonders Cafe As The Hub For Xilnex Retail Tech Experience Center

    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    • Fintech
  • Property
    • All
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    From left Eizzar Supiar, AVP - Evaluation, Cradle_ Adlin Yusman, Co-Founder of BeMalas_ Suthenesh Sugumaran, Co-Founder of BeMalas_ and Joyce Wee, Former Executive Director of Etalage

    Cradle Circle: Bridging Visionary Startups and Investors in Second Series Event

    Gorgeous Geeks Marks 15 Years of Empowering Women in Technology

    MDDA Celebrates 30 Years of Industry Excellence

    DNA Mapping, A Revolutionary Medical Breakthrough

    Thomson Ushers In New Treatment for Spinal Muscular Atrophy

    Authority Institute’s Maverick Foo named Vistage Malaysia’s Speaker of the Year

    Digital Niaga Empowers Local Businesses With Digital Access To Financial Solutions for Micro, Small Medium Enterprises’ (MSMEs)

    Bizsu: On A Mission To Cool Down The World And Save The Environment

    Management team of Web Bytes Sdn Bhd (from L-R) at the Launch of Xilnex Retail Tech Experience Center: Ng Tiong Kuan, COO; Lee Ming Kew, CFO; Ooi Boon Sheng, CEO; Eng Aik Kian,  CTO (far right); Tan Wei Kit, Business Development Director (2nd from right) with Lee Kah Hin Jerry, Chief Investment Officer of GD Express Bhd (4th from right) and Ken Phua, Deputy President of MRCA (3rd from right)

    Web Bytes Unveils Wonders Cafe As The Hub For Xilnex Retail Tech Experience Center

    • First Time Home Buyers
    • Central
    • Northern
    • Southern
    • Sabah & Sarawak
    • Regional / Global
    • Feature
  • ESG
  • Lifestyle
  • News & Events
  • Bahasa Melayu
No Result
View All Result
  • Start Here
    • All
    • Guides
    • How-Tos
    • Analysis

    PropertyGuru: Malaysian Residential Property Market Continues To Face Challenges As Supply And Demand Declines

    Fed Turns The Tide In War On Inflation, But It’s Too Early To Declare Victory

    The Smart Investor’s Guide to Insurance

    Highlights: Malaysia’s Revised Budget 2023

    4 Reasons Why You Need To Invest In ETF

    SPY vs SPUS: A 2023 Comparison of S&P 500 ETFs

    It's time to embed ESG into your investment portfolio. | Credit: nattanan23 via Pixabay

    The Smart Investor’s Guide to ESG

    (L-R) Kenny Yee, Head of Research and Thong Pak Leng, Vice President of Equity Research

    Post 2023 Budget And Q4 Market Outlook Commentary By Rakuten Trade

    Image by dashu83 on Freepik

    Why This Economic Cycle Is Different?

    • Guides
    • How-Tos
    • Analysis
  • Investments
    • All
    • Asset Management
    • Stocks
    • Islamic Finance
    • Alternatives Investments

    Malaysia’s dance with FAANG Giants

    AIIMAN menjalin pakatan strategik dengan Bank Islam sebagai Rakan Pengedar Untuk Luaskan Capaian Kepada Produk Kekayaan Syariah

    E-mail Popup Warning Window Concept

    ICMR Research Series: Safeguarding Malaysian Investors Against Financial Scams

    How Is The Malaysian Property Industry Doing Post-Covid?

    What Can We Learn From The “Equity Risk Premium” About The Prospects For Equities Vs Bonds

    SC-Bursa: Measures To Boost Capital Market Vibrancy And Competitiveness

    Still Worth Investing In Sustainability In 2023?

    ICMR Research Series: Unexpected Life Situations And Industry Issues Drive Vulnerability For Malaysian Investors

    Bursa Malaysia Expands “Approved Securities” Criteria To Boost Market Vibrancy

    • Asset Management
    • Stocks
    • Islamic Finance
    • Alternatives Investments
  • Personal Finance
    • All
    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance

    Trust In Transition: Ensuring Legacy Security Amidst Blended Family Dynamics

    Property Tussle: Being Left Homeless After Sister’s Death

    Employment Opportunity Fraud Syndicate: Lidt Cooperation Advertising Sdn Bhd Or Lidl Cooperation Advertising Sdn Bhd

    What You Need To Know About The Insurance Industry In Malaysia

    5 Rules For Malaysians To Improve Their Financial Wellbeing

    Tears In Heaven: Who Protects Your Insurance Money?

    Patterns And Types Of Cybercrime In Malaysia From 2016 To 2021: Part 2

    Patterns And Types Of Cybercrime In Malaysia From 2016 To 2021: Part 1

    ICMR Research Series: Millennials And Gen Z Must Plan Early For A Better Retirement In A Changing World Of Work

    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance
  • Enterprise
    • All
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    From left Eizzar Supiar, AVP - Evaluation, Cradle_ Adlin Yusman, Co-Founder of BeMalas_ Suthenesh Sugumaran, Co-Founder of BeMalas_ and Joyce Wee, Former Executive Director of Etalage

    Cradle Circle: Bridging Visionary Startups and Investors in Second Series Event

    Gorgeous Geeks Marks 15 Years of Empowering Women in Technology

    MDDA Celebrates 30 Years of Industry Excellence

    DNA Mapping, A Revolutionary Medical Breakthrough

    Thomson Ushers In New Treatment for Spinal Muscular Atrophy

    Authority Institute’s Maverick Foo named Vistage Malaysia’s Speaker of the Year

    Digital Niaga Empowers Local Businesses With Digital Access To Financial Solutions for Micro, Small Medium Enterprises’ (MSMEs)

    Bizsu: On A Mission To Cool Down The World And Save The Environment

    Management team of Web Bytes Sdn Bhd (from L-R) at the Launch of Xilnex Retail Tech Experience Center: Ng Tiong Kuan, COO; Lee Ming Kew, CFO; Ooi Boon Sheng, CEO; Eng Aik Kian,  CTO (far right); Tan Wei Kit, Business Development Director (2nd from right) with Lee Kah Hin Jerry, Chief Investment Officer of GD Express Bhd (4th from right) and Ken Phua, Deputy President of MRCA (3rd from right)

    Web Bytes Unveils Wonders Cafe As The Hub For Xilnex Retail Tech Experience Center

    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    • Fintech
  • Property
    • All
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    From left Eizzar Supiar, AVP - Evaluation, Cradle_ Adlin Yusman, Co-Founder of BeMalas_ Suthenesh Sugumaran, Co-Founder of BeMalas_ and Joyce Wee, Former Executive Director of Etalage

    Cradle Circle: Bridging Visionary Startups and Investors in Second Series Event

    Gorgeous Geeks Marks 15 Years of Empowering Women in Technology

    MDDA Celebrates 30 Years of Industry Excellence

    DNA Mapping, A Revolutionary Medical Breakthrough

    Thomson Ushers In New Treatment for Spinal Muscular Atrophy

    Authority Institute’s Maverick Foo named Vistage Malaysia’s Speaker of the Year

    Digital Niaga Empowers Local Businesses With Digital Access To Financial Solutions for Micro, Small Medium Enterprises’ (MSMEs)

    Bizsu: On A Mission To Cool Down The World And Save The Environment

    Management team of Web Bytes Sdn Bhd (from L-R) at the Launch of Xilnex Retail Tech Experience Center: Ng Tiong Kuan, COO; Lee Ming Kew, CFO; Ooi Boon Sheng, CEO; Eng Aik Kian,  CTO (far right); Tan Wei Kit, Business Development Director (2nd from right) with Lee Kah Hin Jerry, Chief Investment Officer of GD Express Bhd (4th from right) and Ken Phua, Deputy President of MRCA (3rd from right)

    Web Bytes Unveils Wonders Cafe As The Hub For Xilnex Retail Tech Experience Center

    • First Time Home Buyers
    • Central
    • Northern
    • Southern
    • Sabah & Sarawak
    • Regional / Global
    • Feature
  • ESG
  • Lifestyle
  • News & Events
  • Bahasa Melayu
No Result
View All Result
Smart Investor Malaysia
No Result
View All Result
Advertise with Smart Investor Advertise with Smart Investor Advertise with Smart Investor
Home Investments

How Does The Greater Fool Theory Apply To Crypto Investing?

1 year ago
in Investments, Alternatives Investments, Behavioural Finance
0
0
SHARES
1
VIEWS
Share on FacebookShare on Twitter
Subscribe to Smart Investor E-Magazine Subscribe to Smart Investor E-Magazine Subscribe to Smart Investor E-Magazine

You may have heard of crypto investors being labelled as ‘fools’. Business figures such as Jim Cramer, host of CNBC, and Bill Gates, founder of Microsoft have made such comments. Asian regulators such as Felipe Medalla, incoming governor of the Philippine Central Bank, and Raghuram Rajan, former governor of the Reserve Bank of India, have warned the public about crypto investing.

What And Who Is The Greater Fool?

According to the Greater Fool Theory, investors buy a digital asset not because they believe that it is worth the price, but rather they believe that they are able to sell it later to someone else at a higher price. The original investor is a ‘fool’ and hopes he or she can sell it to a ‘greater fool’ out there. The theory is about investor psychology and not a name-calling insult.

Let’s say you are thinking about buying an NFT (Non-Fungible Token) of a cute animal that costs 1 ETH. You know it’s just a cartoon image on a JPEG file. It doesn’t cost much to produce. You don’t even own the copyright to it and the NFT creator can reproduce other copies for sale.

But you want to buy it anyway because you are confident of selling it (or ‘flipping’ as they say) for 2 ETH. You are influenced by Youtubers and TikTokers who claim to have made a lot of money doing so.

What should you do then? Always, always ask this question – Is there a ‘greater fool’ than you out there who will eagerly pay a higher price than you did for the NFT? If none of your immediate circle of families and friends are willing to do so, then you are the ‘only fool’ you know!

First, you need to be sure there exists a ‘greater fool’ that will buy the NFT from you – before you buy it yourself. If you are not convinced that there is a ready market out there, then you shouldn’t buy it at all.

To further illustrate this theory, here is a real-life case study close to home. Last year, a Malaysian-based businessman Sina Estavi made headlines around the world after buying an NFT of a tweet for US$2.9 million. In April this year, he put it up for sale via an auction and started the bid at US$48 million. However, as Bloomberg reported, the auction for the NFT closed with only seven offers ranging from US$6 to US$280!

You read that correctly, this is close to the cost price – but minus four big zeroes! It is almost a complete write-off. There were just no ‘greater fools’ in the market for this deal.

Are All Crypto Investors Fools?

The Greater Fool Theory has been used to criticise the investment thesis of bitcoin back in its early days, when it was in the sub-US$10K levels. Since then, crypto has become a lot more mainstream. Wall Street is accumulating bitcoins, and even some governments and pension funds are doing the same. Are they all ‘fools’ writ large?

The critique had gone quiet for some time but recently surfaced again due to the NFT mania and ‘degen’ culture. The word ‘degen’ is a shorthand for ‘degenerate’ and refers to crypto investors who go after risky digital assets like NFTs without doing their own research. Crypto ‘degens’ have become the new punching bag in this current bear market with the Greater Fool Theory as its punchline.

For some, the theory is an investment strategy to profit from ‘fools’ – specifically when there is a high degree of price uncertainty and herd mentality in the market. This works for certain assets like art and real estate where there is no objective price reference. The founder of modern macroeconomics, John Maynard Keynes explained this with an example of a beauty pageant, where judges are rewarded for selecting the contestant whom all judges think is the most beautiful, instead of the one they personally find the most attractive.

One can observe similar behaviour in the NFT market. Investors don’t value an NFT based on what they think it’s fundamentally worth, but what everyone else thinks the value of the NFT is. Some investors know how to use this to their advantage, though many fail as well, no doubt. It ends up being a zero-sum game, you either fool others or be fooled yourself.

Disclaimer: Contents above shall not be considered financial advice.

About the Author

Edmund Yong is the managing partner of Celebrus Advisory and appointed by MDEC as part of its Talent Expert Network (formerly known as Digital Expert Panel) for blockchain technology. He is also the resident consultant for GLT Law, a multi-award-winning legal practice with specialisation in digital assets.

Previous Post

Property Investment: Make Money via Capital Gain & Rental Yield

Next Post

Meeting With Your Financial Planner For The First Time?

Next Post

Meeting With Your Financial Planner For The First Time?

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

ESG Evolve 2023 ESG Evolve 2023 ESG Evolve 2023
  • Trending
  • Comments
  • Latest
drawbacks unit trusts investment

5 Drawbacks Of Unit Trusts Investment That You Should Know Before Investing

19/09/2023

Robo Advisor In Malaysia, 8 Robo Advisor Platforms To Choose From

17/08/2022
A calculator on financial chart, financial concept

Tax For The 6 Common Investments In Malaysia

19/09/2023
From left Eizzar Supiar, AVP - Evaluation, Cradle_ Adlin Yusman, Co-Founder of BeMalas_ Suthenesh Sugumaran, Co-Founder of BeMalas_ and Joyce Wee, Former Executive Director of Etalage

Cradle and Bursa Malaysia Collaborate to Facilitate Listing of Local Startups in Bursa Malaysia

11/09/2023

Digital Fundraising Platforms in Malaysia

Retirement Plans for the Self-Employed

SC Guidelines On Digital Assets

Retirement planning advise from the experts

Retirement Planning: Best Practices and Advice From Experts

Trust In Transition: Ensuring Legacy Security Amidst Blended Family Dynamics

27/09/2023

UEM Edgenta’s Speedy COVID-19 ICU Build Earns Malaysia Book of Records Recognition

27/09/2023

Cracking the Code of Neuropathic Pain: Early Diagnosis Vital for Diabetics

27/09/2023

Datuk Ir. Dr. Dennis Ganendra Achieves Coveted RAE International Fellowship for Exceptional Engineering Contributions

21/09/2023

Trust In Transition: Ensuring Legacy Security Amidst Blended Family Dynamics

1 day ago

UEM Edgenta’s Speedy COVID-19 ICU Build Earns Malaysia Book of Records Recognition

2 days ago

Cracking the Code of Neuropathic Pain: Early Diagnosis Vital for Diabetics

2 days ago

Datuk Ir. Dr. Dennis Ganendra Achieves Coveted RAE International Fellowship for Exceptional Engineering Contributions

1 week ago
Smart Investor Malaysia

© 2023 Smart Investor Malaysia | The contents on this website are for educational purposes only. You should always seek your own professional advice from the appropriate financial advisor or institution.

Category

  • About
  • Subscribe
  • Write For Us
  • Payment Policy
  • Shipping Policy
  • Cancellation and Refund Policy
  • Privacy Policy
  • Contact Us

Sign up to read our newsletter

  • Start Here
  • Investments
  • Personal Finance
  • Enterprise
  • Property
  • ESG
  • Lifestyle
  • News & Events
  • Bahasa Melayu

© 2023 Smart Investor Malaysia | The contents on this website are for educational purposes only. You should always seek your own professional advice from the appropriate financial advisor or institution.

No Result
View All Result
  • Start Here
    • Guides
    • How-Tos
    • Analysis
  • Investments
    • Asset Management
    • Stocks
    • Islamic Finance
    • Alternatives Investments
  • Personal Finance
    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance
  • Enterprise
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    • Fintech
  • Property
    • First Time Home Buyers
    • Central
    • Northern
    • Southern
    • Sabah & Sarawak
    • Regional / Global
    • Feature
  • ESG
  • Lifestyle
  • News & Events
  • Bahasa Melayu

© 2023 Smart Investor Malaysia | The contents on this website are for educational purposes only. You should always seek your own professional advice from the appropriate financial advisor or institution.