“Obviously, expensive digital images of monkeys are going to improve the world immensely,” Gates said on Tuesday at the TechCrunch Sessions: Climate 2022 conference, sarcastically referring to the Bored Ape Yacht Club NFTs that attracted millions of dollars and celebrity endorsements. Gates was at the conference as the founder of Breakthrough Energy, his sustainable energy venture fund.
He then added, “I am used to asset classes like a farm where they have output or a company which makes products whereas these asset classes are based on ‘greater fool theory’ as to who would pay a higher price than I would.”
Gates characterized cryptocurrencies and NFTs as a market driven by sentiment. “As an asset class, it’s 100% based on the greater fool theory—that somebody’s going to pay more for it than I do”, he said.
The “greater fool” theory is a practice where people invest in overvalued assets—regardless of their actual underlying value—in the hope that someone else will come along and pay even more for it.
But markets driven by a belief that there will always be someone willing to pay more eventually hit a barrier—when there's no one left willing to pay a higher price. Once that point is reached, asset prices can decline rapidly, leaving investors “holding the bag” with worthless assets.
Gates has previously criticized cryptocurrency for its lack of any real value. "The value of crypto is just what some other person decides someone else will pay for it, so not adding to society like other investments,” Gates said on a Reddit question-and-answer session in May.
Crypto prices are crashing as investors flee to less-risky assets. Bitcoin is down by over 50% for the year. Once-bullish crypto companies like Coinbase, Crypto.com and BlockFi are laying off employees as trading volumes decrease. Falling crypto values are also sinking projects like crypto lender Celsius Network and Terraform Labs' algorithmic stablecoin.
NFT values are also dropping amid the broader plunge in the crypto market.
The NFT Index, which tracks the performance of eight popular NFT-related tokens, is down 30% for the week, according to CoinMarketCap.
