Is Bitcoin the Greater Fool?

We often hear that Bitcoin is the Greater Fool, at least in financial terms. They might be right, but I think there is more to this theory than what you might think.

Joël here! 👋

OK, before I get to the nitty gritty, I wanted to use this opportunity to explain where I've been for the past eight months.

It’s been a while since I’ve published a blog post here. There are three reasons for this.

• I moved to a new apartment and spent many evenings setting up my new home.

• I had a lot of work to do with Relai, where I now record many videos and content.

• I traveled a lot in the past three months and wasn’t up for it to write new blogs.

As I learned over the last couple of months, there are times in life, at least, when it’s good to disconnect, cherish real-life connections, spend time with friends or family who’re providing for you, and think about what you want to do next.

It might sound esoteric - which is funny if you know me IRL, as I’m not esoterical at all - but that’s why I wasn’t in the mood to write another blog, just for the sake of writing one.

Now that we have established why I’ve been absent, it’s time to get into the topic of the day: Is Bitcoin the greater fool?

Estimated reading time: 8 minutes 44 seconds

Let’s get stuck in!

What’s up With This Greater Fool Theory?

It doesn’t matter whether you’re a Bitcoin OG, work in the industry, or just joined. There is a very high likelihood that you’ve heard the saying that Bitcoin is the greater fool.

Warren Buffet—someone who regularly dumps on retail and is always looking for a greater fool to sell to—is probably the most famous investor who regularly says this.

But what’s the greater fool theory, and why is Bitcoin always part of that discussion?

Simply put, a greater fool is someone who’s either driven by FOMO or optimism and always buys an asset at the worst possible time.

In general, he’s being exploited by more established investors. People who realize which investor is the greater fool are usually the ones dumping on their behalf or eating up the assets the greater fool is selling.

Therefore, more ‘established’ investors - aka big financial institutions who literally kill to get whatever they want - want greater fools in the markets, as it’s easy to make money off them in the long run.

Obviously, they also profit from this, as they’re able to scoop up an asset. One might even say that these institutions need greater fools to accumulate as many shares in a company or any other asset as possible.

Bitcoin a Network of Visionaries, Not Fools!

All good, so far? I know it seems a bit complicated, but there is a catch-22 to this story real soon.

Being a greater fool is not ideal. You get dumped by other investors, laughed at, and generally, nothing seems to work out for you.

That’s true if you look at an asset like any general equity investment or real estate.

However, Bitcoin is a different animal! Sure, there is a token with a fiat-denominated price you can trade. It’s now also part of Wall Street with the ETFs, and it seems like institutions are becoming more interested.

That’s only one part of the story. The more important aspect of Bitcoin - which the media regularly ignores or forgets - is the network effect of the ecosystem.

Value investors—the ones who look at a company and can tell whether it's good or not—say that Bitcoin has no intrinsic value.

There is no utility in using it in the real world, and it’s backed up by nothing but the belief of its followers. Arguably, none of them actually invested 10 hours into studying Bitcoin.

I’m sorry bud, but have you heard of any of the fiat currencies we use daily?!

All of them are based on the belief in central banks, the government and an occasional backing in hard assets such as gold, with as little as 5%. We trust them to not fuck it up.

Bitcoin is the greater fool because these established value investors don’t understand how a monetary network with a set-out economic policy works.

Every single Satoshi in the network is connected to the physical world, as there are giant mining sites utilizing a lot of energy to back and secure one of the biggest networks in the world.

Unlike other crypto projects, this network is not here to pump the token but rather to offer a decentralized ledger and the option to trade with anyone worldwide—without the permission of a central bank or anyone in the middle!

The cherry on the cake with this is that Bitcoin is being used by people who have never had access to a bank. They only need to create a wallet and find a way to exchange their currencies or services in Bitcoin.

Anyone who realizes this now and understands what an impact a disinflationary asset can have on the world is buying Bitcoin like crazy.

They’re not crazy or fools but rather forward-thinking, and they have realized the current system will not survive if it continues as usual.

And believe me, if you have that HOLY FUCK moment with Bitcoin, you end up realizing how much more work we have left to do and how it can be the solution to many problems in the world.

Experts Used to Call the Internet a Failure as Well

There was a time in the early 2000s when so-called experts, such as Paul Krugman, thought the Internet would never ever be as big as early adopters made it out to be. In fact, Krugman gave us this gem of a statement:

It’s safe to say that Krugman missed the mark quite significantly. Yet, he’s one of the gurus telling you that Bitcoin is a Ponzi or investors are greater fools.

Let me repeat this: The guy who called the biggest opportunity of the century wrong is telling you now that the second biggest opportunity of the century is bad or overrated, too. You can’t make this up!

I don’t need to list all the benefits we enjoy these days since the emergence of the Internet. Sure, there are also drawdowns—look at you, there letter agencies—but overall, life has vastly improved, and the speed at which communities can gather now is beyond what anyone imagined 40 years ago.

Many of these experts don’t realize, at least when they speak of the greater fool theory, that there is a vast difference between speculation and participation.

Sure, it's speculative to invest in an Internet startup in the early 90s. You don't know if you'll get your money back. However, there is also another angle to this. If you were part of that early team, you shaped the world and how we use technology today.

One approach is to look at something from a financial aspect, simply to make money. The other approach is to participate and change the world for the better.

The same applies to Bitcoin. In my day job at Relai, I regularly communicate with journalists, the press, or big names in the economy.

There are times when all of them are interested in Bitcoin—mostly when the price pumps and a financial incentive is involved—and they want to find out more about it.

Unfortunately, this is the only time when they don’t treat you like a child or some lunatic who’s crazy enough to invest in this Internet thing.

They don’t understand that the financial gain is just a benefit of Bitcoin and that we’re actually investing in it because we want to be financially independent, do whatever we want, or plan for a better future.

Just like with the Internet, they miss the mark completely.

The World Needs a Greater Fool to Succeed

One episode of ‘The Newsroom’ inspired me to write this blog post. It’s episode ten in season one. What’s the name of the episode, you may ask? The Greater Fool.

There is this brief exchange between the leading character, Will McAvoy, and Sloan Sabbith, a business analyst on the show.

Will was dragged through the media during season one but realizes that being the greater fool is a superpower, not a weakness.

Sloan told Will that the world and markets needed a greater fool to succeed—someone who would continue to buy or invest, no matter what.

Most people spend their lives not trying to be the greater fool. They would be embarrassed, go against what’s cool right now, and lose a lot of status among peers.

By doing this, they prioritize status, ego, or money above everything else, and they lose sight of the bigger picture.

The greater fool—with all its downsides, especially if he loses money—is the one guy with the perfect blend of self-delusion and ego who thinks he can succeed where others have failed.

To bring this back to Bitcoin: Instead of improving the current financial system, Bitcoin, as the greater fool, is there to show that you can get the job done with a different approach.

Bitcoin’s idea was to offer a peer-to-peer electronic cash system to anyone smart enough to run a computer. It’s backed by the biggest hashing network in the world, and the best part is that it only takes 12 words in a specific order to participate!

That’s why Bitcoin is the greater fool, but not in the traditional sense, as the experts describe it. Instead, the one guy left standing is fighting against a rotten financial system.

We need Bitcoin to be the guy taking the hits. Because every hit piece, FUD article, or misconception by experts on TV makes it more resistant and bigger in the end.

I don't understand how you can look at this and not see its immense value. In fact, I think it’s disgusting that you look at it from a purely financial aspect and not at the entire network as a whole.

Its superpower is not the ability to break new all-time highs every four years but to show the world how all financial models or institutions are broken and that it’s time to develop a new system.

One that doesn’t enable money printing and expansion at the core but rather one with an open system where everyone can participate.

Therefore, Bitcoin is the greater fool. But not the one we usually read or hear about, but the one everyone needs to improve their lives and become part of something bigger.

If you look at this and tell me I’m crazy to think this way, I only have one quote by Satoshi in mind: If you don’t believe it or don’t get it, I don’t have the time to try to convince you, sorry.