I just realized something quite interesting about the crypto market — how people often get caught up in irrational price surges. You know, crypto bubbles are like hot water balloons; they gradually grow bigger, then even larger, until they burst. The actual value of a coin or project suddenly skyrockets in a short period, then sharply drops back down.

The main reason is that market demand far exceeds the real value of crypto assets. People see the price rising and get excited, jumping in to buy before they even understand what’s going on. This causes the bubble to inflate even more.

I see three main factors causing this situation. First is FOMO — the fear of missing out. When you see others making profits, you think, “If I don’t buy today, the price might go up tomorrow, and I’ll miss the chance.” Second is excessive excitement. People only see the rising price and think it’s “good,” without considering the technology or practical applications. Third is social media influence — promotional messages from influencers on Twitter, Telegram claiming “this will increase a lot, and you’ll make huge profits,” which misleads people into buying in.

Looking back at history, I see there have been two major crypto bubbles. In 2017, when ICOs became popular, new companies rushed to issue tokens to raise funds. Bitcoin also surged at that time, drawing more attention to the crypto world and leading to investments in projects with no guarantees. Most of these projects disappeared, and investors suffered losses.

Then after 2020, DeFi and NFTs became very hot. NFT PFPs like Bored Ape Yacht Club and CryptoPunks reached prices in the millions of dollars. People spent hundreds of millions on small artworks, thinking the future would be brighter. But then the market crashed, and the value of most NFTs plummeted.

So, how can you recognize a crypto bubble? If a crypto’s price surges sharply in a short time, you need to be cautious. A project with no real technology or practical application that only increases in price could be a sign of a bubble. If media outlets or influencers say, “Buy this, the price will go up a lot,” you should also be alert.

I want to share some ways to protect yourself. No matter what project you invest in, do your own thorough research — who is involved, how the technology works, what problem it solves. Doing your homework before investing is very important.

Don’t buy when prices are rising rapidly and sell quickly — that’s a common trap in bubbles. Think long-term and only invest in projects you truly trust. Don’t put all your money into a single crypto — diversify your portfolio wisely. When prices go up, take some profits to secure your initial capital. That way, even if the market drops later, you won’t lose your entire investment.

In summary, be cautious of excitement in the market. Investment decisions should be made systematically and wisely, not driven by emotions. Do thorough research before making decisions — that’s the key to avoiding crypto bubbles.