Understanding Speculative Bubbles A speculative bubble occurs when asset prices surge far beyond their intrinsic value, driven by exuberant investor behavior. Such bubbles often rely on the “greater fool” theory – investors buy overvalued assets hoping to sell to someone else at an even higher price. Eventually, reality sets in, demand evaporates, and prices plummet, inflicting heavy losses on those left holding the asset. Throughout history, financial manias have demonstrated the psychology of bubbles: a rapid rise fueled by frenzy and FOMO (fear of missing out), followed by a dramatic crash when confidence collapses. Below are some of the most notorious examples