web3/concepts/bubble.md

Bubble

An economic bubble is a phenomenon in markets created by herd mentality, whereby people hear stories of others who bought in early and made big profits, causing those who did not buy to feel a fear of missing out. This causes irrational pricing of the asset which proceeds until the mania subsides.

Attempting to time the market on bubbles is a zero-sum game and has a negative expected return.

See "madness of crowds".

Examples

• South Sea Bubble
• Beanie Baby Bubble
• London Rail Bubble
• Tulip Mania
• Dot-com Bubble
• Japanese Real Estate Bubble
• Cryptoasset Bubble

References

• [@mackay_extraordinary_2012]
• [@bernstein_delusions_2021]
• [@blanchard_bubbles_1982]
• [@fry_negative_2016]