Understanding Economic Bubbles

An economic bubble occurs when the price of an asset skyrockets beyond its intrinsic value due to excessive speculation and trading. This often leads to a frenzy of investment as more individuals attempt to capitalize on rising prices, driving the asset's value even higher. However, the excitement is short-lived, as the bubble inevitably bursts when confidence wanes, and prices plummet. As a result, many investors find themselves holding worthless assets, sometimes risking their entire savings in the process.