Market Bubble
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A Market Bubble occurs when the prices of assets, like stocks or cryptocurrencies, become significantly inflated beyond their intrinsic value, driven by excessive speculation. Eventually, the bubble bursts, leading to a sharp price correction.
How It Works
During a bubble, demand grows rapidly, causing asset prices to rise beyond their fundamental value. When the bubble bursts, prices collapse as market participants rush to sell off their holdings, causing panic and losses.
Why It Matters
Market bubbles can lead to significant financial instability and losses for investors. Understanding the signs of a bubble helps avoid investing in overvalued assets and reduces the risk of substantial losses.