Asset Bubble

An asset bubble occurs when the prices of assets, like real estate or stocks, rise rapidly to levels that exceed their intrinsic value. This surge is often driven by excessive speculation, investor excitement, or easy access to credit. People believe prices will keep rising, prompting even more buying. Eventually, when reality sets in and confidence wanes, prices plummet, leading to significant financial losses. The bubble bursts, causing economic instability and impacting many beyond just the investors. Understanding this cycle is crucial for making informed financial decisions and recognizing potential risks in the market.