To Top

The Concept Of Financial Bubble

The finance market is one such term that throws people off and makes them overwhelmed, mainly because of the complex nature it holds. Many people fail to understand the underlying mechanism of the market. A financial bubble is just one of those things that people usually forget to understand and identify. It is a reasonably simple concept if explained easily. That is why I have attempted to make it easy for everyone to understand. When a particular market skyrockets, benefitting many people, and suddenly crashes and hits the ground. That is when you know that a financial bubble has burst.


The 2000 Stock Market Disaster

For a much clearer perspective, I want to bring in the example of the 2000 U.S stock market. It was the arrival of the internet with the potential to modify the basics of business. Even the companies with no potential value were selling like hotcakes. The tech stock was at its peak. People were even warned of the whole situation, which they ignored, and eventually faced huge losses when the bubble burst.


When Property Was Platinum

Yet another example of a financial bubble is the 2007 peak in the U.S real estate market. Every other person wanted to join the bandwagon and multiply their assets by investing in real estate. The sudden rise in the market grabbed the attention of the masses. Eventually, the concept evolved that the market could never face a crash. Unfortunately, as the events progressed, the bubble burst and people found themselves in debt.


The Current Bubble

Looking at the current scenario, one can quickly conclude that we are going through another financial bubble. This one revolves around Bitcoin and other crypto-currencies. Of course, it is not natural for someone to trade their car for some units on the internet, but this is happening. The situation is the same as in the past. People are invested in crypto-currency to such an extent that any opinion against it results in ultimate rage and aggression. Here I suggest that people give risk management a try as this would be the last ray of hope when the bubble hits the pin.

More in financial advisor

You must be logged in to post a comment Login