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Speculative Bubble

A speculative bubble is a sharp& steep rise in asset prices such as shares, bonds, housing, commodities or crypto-currencies

The bubble is usually fueled by high levels of speculative demand which takes prices well above fundamental values

The housing markets of many countries have exhibited speculative bubbles frequently over the years, perhaps the best example being the sub-prime housing boom in the United States widely regarded as one of the root causes of the Global Financial Crisis.

There have been several recent examples of speculative bubbles in various markets around the world. Some examples include:

  1. The dot-com bubble of the late 1990s and early 2000s - This bubble was centered around the growth of technology companies and the internet. Many internet-based companies saw their stock prices soar, but the bubble eventually burst as investors realized that many of these companies were overvalued and not profitable. The NASDAQ composite index, which is heavily weighted towards technology companies, peaked at 5,048.62 in March 2000 before collapsing.
  2. The US housing market bubble of the mid-2000s - This bubble was driven by low interest rates and easy credit, which led to a boom in the US housing market. Housing prices reached unsustainable levels, and when the bubble eventually burst, many homeowners found themselves with homes that were worth less than their mortgage. The S&P/Case-Shiller US National Home Price Index peaked at a level of 186.71 in July 2006 before declining.
  3. The cryptocurrency bubble of 2017-2018 - This bubble was centered around the growth of cryptocurrencies like Bitcoin. The price of Bitcoin, for example, rose from around $1,000 in early 2017 to a peak of almost $20,000 in December of that year. The bubble eventually burst, and the price of Bitcoin fell back to around $3,000 by December 2018.

These are just a few examples of speculative bubbles in recent history. It's important to note that bubbles can occur in any asset class and that they are often driven by a combination of factors, including market speculation, low interest rates, and easy credit.

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