The greater fool theory contributes to the formation of asset bubbles.

Features of the greater fool theory:

(1) an asset becomes popular or has a following

(2) the asset continues to rise in price over time, sometimes years or decades

(3) the amount being paid for the asset exceeds its intrinsic value

(4) a person buying the asset at an inflated price believes that it can be sold for a profit to "a greater fool"


Eventually there is a sell-off and the market collapses



(1) Chinese real estate in the early 21st century

(2) possibly cryptocurrency


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