"Bubble" refers to a phenomenon where asset prices rise rapidly to levels significantly above their intrinsic value, driven by speculative demand rather than fundamentals. Often fueled by excessive optimism, leverage, or herd behavior, bubbles can form in markets like stocks, real estate, or cryptocurrencies. As prices detach from reality, the bubble eventually bursts when confidence wanes, leading to sharp declines and financial losses. Historical examples include the 17th-century Tulip Mania, the 2000 Dot-com Bubble, and the 2008 Housing Bubble. Bubbles highlight market inefficiencies and psychological biases, underscoring the risks of irrational exuberance. Policymakers and investors monitor signs like unsustainable valuations to mitigate their destabilizing effects.
