What best describes 'speculative bubble'?

A speculative bubble is characterized by a spike in values based on exaggerated expectations about future prospects. This phenomenon often occurs when investors become overly enthusiastic about an asset, leading to inflated prices that do not reflect the underlying fundamentals. For instance, during periods of speculation, the demand for certain assets skyrockets, driven by the belief that their prices will continue to rise. However, when these expectations are not met, the bubble ultimately bursts, causing prices to plummet back down.

The context of this concept can involve various markets, such as real estate, stocks, or cryptocurrencies, where investors might be drawn in by hype or promise of high returns without sufficient analysis of the risks involved. Understanding this helps in comprehending market behaviors and the importance of grounding investment decisions in realistic assessments of value rather than mere speculation.