Asset Price Bubbles

An asset price bubble is a market phenomenon characterized by a rapid, unsustainable increase in the price of an asset, far exceeding its fundamental value. Bubbles are driven by excessive speculation, herd behavior, and the belief that prices will continue to rise indefinitely.

Eventually, the influx of new buyers slows down, and the lack of underlying value becomes apparent, leading to a sudden and often violent crash. Throughout financial history, bubbles have occurred in everything from tulip bulbs to dot-com stocks and digital assets.

They are defined by the disconnect between market price and the actual utility or revenue-generating capacity of the underlying asset.