When you hear the term “bubble crisis,” debt immediately comes to mind, right? This issue is connected to financial crises we’ve seen before: an economic collapse, huge losses of money. What happens is that asset prices rise rapidly beyond their real value, followed by a rapid contraction—that’s what we call a bubble crisis.

When a bubble forms, the prices of the assets people invest in—whether real estate, stocks, or crypto—rise far beyond what’s reasonable. It’s mostly driven by speculation, investors’ excessive confidence, and the feeling that prices will keep going up. But once prices rise high enough, reality appears: the bubble bursts, prices drop quickly and violently, and investors are caught off guard—like an overinflated balloon.

Let me give an example from history. The U.S. real estate bubble crisis in 2551 B.E. (2008) is a very good case study. Mortgage loans were approved without strict standards. People took out loans to buy homes they couldn’t really afford—but they were speculating. Financial instruments tied to these loans also became popular. The real estate market grew rapidly. As home prices surged, the value of the loans rose accordingly. But when borrowers began defaulting, the whole system collapsed.

The bad debts expected to arise from financial institutions worldwide were as high as $15,000 million. It’s a good reminder of just how risky speculative investing can be.

In Thailand, the 2540 B.E. (1997) Tom Yum Goong crisis is also a classic example of a bubble crisis. Interest rates were extremely high, yet the real estate market was booming. Investors saw opportunities to profit quickly, and foreign capital poured in. Real estate prices rose crazily. When the baht was devalued, debts denominated in foreign currency surged. The bubble burst, real estate prices fell sharply. Borrowers who had taken on too much debt couldn’t repay, and Thailand’s economy deteriorated severely.

There are many factors that cause bubbles: low interest rates, a good economic situation, new technology, and a shortage of assets. But the most important thing is human behavior. When investors see prices rising, they rush in—driven by FOMO—pushing prices to be overblown. Speculation and following the crowd, psychological biases, groupthink: warning signs are ignored, and the bubble keeps expanding.

Bubbles usually go through five stages. First is displacement: something new and exciting enters the market. Second is the rally: investors rush in out of fear of missing out, and prices rise. Third is euphoria: investors believe prices will keep going up, so investment and speculation increase. Fourth is profit-taking: some investors realize prices have risen too high and start selling. Fifth is panic: as more people realize the bubble has burst, a wave of panic selling occurs, and prices fall rapidly and violently.

So, how do we protect ourselves from a bubble crisis? The first point is to review your own objectives—are you investing out of fear of missing out, or because you truly understand the underlying assets? The second is to diversify risk: you shouldn’t put all your money into just one type of asset. The third is to limit speculation. If you suspect a bubble is forming, you should reduce investment in speculative assets.

Another approach is to invest gradually—don’t put all your money in at once. This kind of cost averaging helps you avoid buying when the bubble bursts, and it reduces the impact of volatility. Keep some cash on hand to take advantage of opportunities after the bubble bursts. And most importantly, you must understand the market: keep track of information and research thoroughly before making investment decisions.

In summary, a bubble crisis happens because asset prices rise beyond their true value due to speculative behavior and excessive confidence. Since that situation can’t last, eventually people realize assets are overpriced. Once they start selling, prices fall quickly—the bubble bursts. We can’t control all these factors, but we can prepare in time: diversify, increase income, and invest carefully. That’s the best way to protect yourself from a bubble crisis.