Not long ago, I wrote an article about how BTC was showing signs of a bubble. And you know what struck me? How many people have no idea what a “bubble” is in the financial sense! It’s like when you say “bubble,” you immediately picture soap bubbles from your childhood, cheerfully rising in the sun… And then — bam! — and it bursts. That’s pretty much how it is with crypto bubbles, the only difference is that here the bursting of bubbles affects wallets and, unfortunately, is far from childish.
So, let's figure it out! What is a cryptocurrency bubble?
Let me make it clear right away: a crypto bubble is not some ephemeral thing that suddenly flies in and takes over the market. It is a cyclical process when the price of an asset, for example, Bitcoin or another popular coin, begins to grow madly, attracting more and more investors. On the wave of excitement, people rush to buy cryptocurrency, afraid of missing out on the “last chance to get rich”, and then — surprise! — the bubble bursts, and those who recently entered at the maximum are left sad and with losses.
Key Signs That a Crypto Bubble Is Coming
There are several telltale signs that a market is already beginning to balloon and move toward a potential crash. Let's look at them in more detail so that readers can recognize them, like recognizing an old friend in a crowd.
1. A sharp rise in prices. Have you noticed how suddenly the prices of cryptocurrencies start to soar? Usually, this happens by tens or even hundreds of percent in just a couple of weeks, and sometimes even days!
2. Emotional trading. Suddenly everyone around you starts talking about how you can get rich with cryptocurrencies:
— Look, I bought it and started earning money right away!🤥
People are succumbing to the excitement and fear of missing out, which pushes them to impulsive purchases. Investors, newbie after newbie, pour their money in without even fully understanding what they are investing in. Why bother? Everyone is buying! This stage is commonly called FOMO — Fear of Missing Out. (I wrote a separate article about this)
3. Volatility. A bubble is always accompanied by price fluctuations - today the price is at its peak, tomorrow it collapses, the day after tomorrow it grows a little again. Such swings create the illusion of profitability, and, indeed, you can earn a lot, but the risks are also high.
4. Peak and Crash. When a bubble peaks, there is that unexpected “bang!” — a sharp drop in prices. If you look at a chart, you can see how the price suddenly falls off the mountain, leaving buyers who recently entered the market with losses. This moment is often painful for those who got carried away and managed to invest their last savings, counting on further growth.
How Does a Crypto Bubble Work? Phases of the Cycle
Now let's imagine the process of the emergence of a crypto bubble as a sequence of phases:
1. Initial phase. Here, interest in the asset is just waking up: the price is growing, but this is still "still water". Professional investors, seeing the prospects, begin to invest little by little, gradually raising the rate.
2. The surge phase. Suddenly, everything starts to accelerate: growth becomes noticeable, news appears, and excitement flares up around the asset. More and more people join the race for profit, and mass buying begins, causing the price to grow exponentially.
3. Peak and public excitement. Now cryptocurrency is being talked about everywhere, from the media to bloggers. Almost every second person considers himself an expert. People rush to buy without delving into the details and mechanisms of the coin, because they are sure that “everything is just beginning”.😵💫
4. The bubble bursts. At some point, the big investors, the ones who got in at the beginning, start taking profits and exiting. The mass exodus leads to a sharp fall, and all those who got in at the peak are left with assets whose price has collapsed.
How to avoid becoming a victim of the crypto bubble?
To avoid getting trapped, it is important to remember a simple rule: invest only the funds you are ready to lose. The crypto market is not only high profitability, but also huge risks. Do not follow the crowd and buy into promises of quick profits. Study the project well and weigh all the risks. Remember that cryptocurrency is a highly volatile asset, and its price can either quickly soar or fall sharply.
Hopefully the picture is clearer now! So next time you are told: "Buy, tomorrow will be more expensive!", ask yourself - is another bubble inflating?
Concluding my epic with explaining crypto-bubbles, I will say this: “well, in this situation, we are simply ours, that’s it, we are already, here our powers are all over...” How much can we explain that Bitcoin and other cryptocurrencies are now inflated to the skies? 🤬 I tried to convey, warned - but, as they say, someone decided that this is just another “rocket to the moon”.
So, friends, this is my last message! Remember: before you run out and buy coins, think about whether you will be the one holding the deflated bubble when it's all over. That's it. The end 🤐