Bubble

A bubble is when there is a rapid increase in an asset’s price, driven by excessive demand, speculation, and market behavior. This rapid inflation in price does not occur because of how valuable the asset really is, but instead because people think the price will continue to rise, and hence they believe they can sell it for a profit later. Eventually, people realize that the asset is overvalued, so all holders of the asset sell at once when they begin to panic. When all investors sell their holdings the “bubble bursts”, leading to a sharp decrease in prices and financial losses for many investors involved.