‘Dumbest Theory’: Gates Criticizes Crypto and NFTs

In finance, the dumbest theory starts with an investor doing something stupid in the hope that someone else will later decide to do something even more stupid.

The first buyer pays an inflated amount of money for a good that he will then put up for sale at an even more exorbitant price trying to find someone even “dumber” to buy it.

In this dangerous game, what is exchanged can be tulips – as happened in the first great financial bubble in world history in the first half of the 17th century – or, according to the latest statements by Bill Gates, bitcoins.

The founder of Microsoft stated at a conference in Berkeley, California, that the market for cryptocurrencies and NFTs (digital tokens) is based “100%” on the theory of the great fool.

And it is that according to this theory, it is possible for investors to make a profit by buying too expensive and then selling it to another investor.

This whole cycle works without anyone stopping to think what the real value of the asset is and many investors fall into this trap, experts say, probably without knowing it.

The price of gasoline can go up and up, but oil is always backed by its utility. It is useful for something.

Gates added that he prefers to invest in companies that create real products.

And not in a service whose “anonymity is used to evade taxes” he said in reference to the most famous cryptocurrency.

He said that people bought cryptocurrencies and NFTs regardless of their price and convinced that they could sell more expensively because “someone is willing to pay more for it than me.”

And he stated that he had never invested in that market.

Other investors and wealthy executives, including Warren Buffett or Jamie Dimon, have also expressed skepticism about cryptocurrencies.

Buffett once called bitcoin “rat poison squared.”

Gates was also ironic about the value of NFTs, or non-fungible tokens.

They are certificates of ownership of virtual or physical assets often used in the world of art or digital music. After becoming extremely popular last year, their demand seems to have plateaued recently.

“Obviously, expensive digital images of monkeys are going to make the world a lot better. It’s unbelievable,” Gates said sarcastically on the forum.

The 66-year-old billionaire philanthropist was referring to the Bored Ape Yacht Club’s digital art collection, a limited run of 10,000 unique pieces of a monkey image with minor variations that sold for thousands of dollars.

But now that the world economy is going through a bad time, investors prefer to place their capital in less risky investments and flee from the most speculative bets such as cryptocurrencies or digital certificates, two markets that do not have legal protection.

Bitcoin accumulates falls above 50% in 2022, while ethereum has lost 69% of its value.

The monkeys’ NFT has also lost more than half its value.

All this suggests that the chain to find the “dumbest” has stopped affecting many other parts of the market.

Just this week the Celsius platform, one of the largest lenders in digital currencies and a key player in the world of decentralized finance, decided to protect itself from “extreme market conditions” by freezing the accounts of its 1.7 million users and imposing a kind of “corralito” to its clients.

In the same vein, Binance, the world’s largest cryptocurrency exchange platform, also had to “pause” bitcoin withdrawals for a few hours while Coinbase Global, another major platform, announced that it would lay off almost a fifth of its staff.

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