Let's say I invent a new crypto currency with an extremely limited number of crypto coins, just 4. I sell the first one to my friend Adam for $1. With me and Adam now telling my friend Bill that this will "go to the moon", I sell Bill the second crypto coin for $2. That further spurs interest, and I sell the third coint to Charlie for $3, and the fourth coin to Dave for $4. So what is the market capitalization of my crypto currency now? Well, it is the number of coins in circulation times the latest market price, so 4 times $4 or $16. Then Adam, Bill, Charlie, and Dave want to cash out. But they are unable to find anyone else who believes that crypto coin is worth that much, and end up all selling their coins for $0.25 back to me. Now the market capitalization of my coin is 4 times $0.25, or $1. It's a crypto crash! $15 in value have been wiped out!

But if you think of it, Adam, Bill, Charlie, and Dave all together just spent $10, and got $1 back, so the actual money lost was just $9. That doesn't change if we assume that just before the crash, Adam, Bill, and Charlie sold their crypto coins to Dave for $4. Only that now Dave lost $15, and Adam, Bill, and Charlie together made $6, the difference still being $9. And Adam, Bill, and Charlie are probably still big fans of crypto currencies, with Dave being the "greater fool" on which these money making schemes rely upon.

But the main scammer in this hypothetical scenario would me, because I "pumped and dumped" my completely worthless crypto currency. The $9 weren't "lost", they are in my pocket now. And why  scam gullible people with crypto currency instead of selling them a bridge, an emerald mine, or worthless shares? Because previous financial scams, like Charles Ponzi's original "Ponzi scheme", have led to regulations and laws against financial fraud when they concern more traditional financial tools. Crypto currencies and NFTs being "new" doesn't only make them more attractive to greater fool buyers ("this time it's different"), it also has the added advantage of being mostly unregulated. For the time being, because as soon as a lot of people lose a lot of money, they will be the ones asking for protection, aka regulation.

Charlie still making a buck by buying the crypto coin for $3 and selling it to Dave for $4 is lucky for him, but that doesn't make his "crypto investment" a smart move. It is a game of Russian Roulette, it gets more dangerous the further it goes on. Dave thought he could sell his crypto coins to Edgar for $5, but it turned out that Edgar wasn't the greater fool, and the crypto currency crashed while Dave was holding the bag. The inherent value of that crypto coin is zero, and anything you pay above that is foolish, just that you might hope be the lesser fool, not the greater one.