close icon

Financial Bubbles: A Short History (Infographic)

Markets go bust so often we somehow accepted that it is a fact of life. The truth is that financial bubbles can be forecast accurately and prevented successfully way ahead of time.

Our friends at Fortunly explain that the life-cycle of a financial bubble always starts with emotional investing. Overblown asset valuations and irrational expectations always fuel the beginning of an absurd bull run. History gives numerous examples of these.

In 17th-century Holland, the most expensive tulips outrageously cost as much as fully furnished houses. During the 19th century, a 10% deposit caused railway stocks in the United Kingdom to sell like hot cakes.

In the 1980s, fear of inflation triggered the rapid rise in silver and gold prices which fell dramatically in less than two years. By the end of the decade the value of the entire land in Japan exceeded that of the United States fourfold, despite being smaller in size 25 times.  

The price of Bitcoin skyrocketed in 2017 from about $700 in January to almost $20 000 in December. The cryptocurrency shed 82% of its value 12 months later.

After extended periods of positive-feedback cycles, the first investors to notice the inflated asset values are always the ones to start the selling frenzy and pierce the previously undetected bubble.

The sharp decline in prices leads to panic. The last ones to react to the sudden market confusion frequently absorb the greatest losses and go bankrupt.

Financial bubbles are unique which is why most economic doctrines and theories fail to accurately anticipate them. They, however, usually share common denominators recognizable enough for anyone (who pays close attention) to see.

To understand how the biggest market crashes in history happened in detail, check out the infographic below!

Financial Bubbles throughout History

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

The Skyscraper Curse

In the 1940s, Edward R. Dewey hypothesized, that the tallest buildings are usually completed after significant market peaks. This infographic will show you six market crashes, that occurred throughout a period of more than a century, as well as eleven skyscrapers, corresponding to these crises. They all seem to be confirming Dewey’s hypothesis. Is it…

Read More »

Trading Style. What is Your Hunting Tactics?

Market trends are fractal in nature. This means that the same trading setups can be found on all time-frames – from the smallest to the largest. But this could turn out to be a problem, because the bigger the horizon, the longer you have to wait before getting any results. So what trading style to…

Read More »

The Iceberg of Trading Success

Most people’s idea of a trader is someone, who just sits on his desk, making tons of money, while drinking his coffee. In reality, things are far more complicated. When the wanna-be trader makes his first steps, he usually reads about a forecasting method, which promises a great success rate. So, he decides that once…

Read More »

The Hidden Engine Behind Riots and Wars

Do you share the common belief that riots, civil unrest or political instability may and often do cause stock market declines? Yes, it makes sense. It seems logical and probably that is the reason why it is the explanation, which the large media offers you, when there is civil disobedience and the stock market of…

Read More »

Ralph Nelson Elliott

Ralph Nelson Elliott was born on this day (28.07) in 1871. This is our way to thank him.

The Fibonacci Magic in the Real World

The Fibonacci proportion is everywhere. You have seen it many times, but probably you did not notice. Here is an infographic about its magic and beauty in the real world.

Elliott Wave Principle and How It Works

The Elliott Wave principle is a form of technical analysis, which is used to analyze market trends, locate extremes in investors’ psychology and forecast future market trends. Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable fractal patterns, called waves. The theory can be validated by using the Fibonacci sequence and…

Read More »

More analyses