Have you ever heard of a crypto bubble? Yesterday, I saw some community members discussing this phenomenon again. It’s like a hot air balloon—at first it’s tiny, then it gradually inflates, getting bigger and bigger until it bursts. The common point is that its real value is never in line with what people are willing to pay.

I’ve noticed that crypto bubbles happen when market demand far exceeds the actual value of a particular currency or project. People only see the price rising, get excited, and rush to buy without looking into anything at all. This makes the bubble grow bigger and bigger.

There are three main reasons behind this situation. First is FOMO—the fear of missing out. When you see other people making profits, you get swept up before you’ve even had time to think it through carefully. Second is blind excitement—people don’t consider the technology or real-world use cases; they only see the price going up, then assume it must be good. Third is the influence of social media—on Telegram or Twitter, influencers keep advertising, “This will increase a lot, and you’ll make huge profits,” which misleads people and makes them pour money in.

I also remember two major events related to crypto bubbles. In 2017, when ICOs became popular, new companies rushed to issue tokens to raise capital. At that time, Bitcoin was also rising strongly, and people became interested in crypto and invested in projects with no guarantees. As a result, most of them disappeared, and investors had to bear the losses. Then after 2020, DeFi and NFTs suddenly became hot. NFT PFPs like Bored Ape Yacht Club and CryptoPunks reached prices of up to several million USD. People spent hundreds of millions on a small picture, thinking the future would be better—but then the market collapsed, and the value of most NFTs dropped sharply. Those were costly lessons about crypto bubbles.

So how can you recognize a crypto bubble quickly? If the price of a certain digital asset jumps in a short time, you need to be careful. A project that has no real technology or practical use cases, yet keeps rising in price, could be a sign of a bubble. If you hear from the media or influencers saying, “Buy this—its price will go up a lot,” you should also stay alert.

I want to share some ways to protect yourself from crypto bubbles. First, no matter what project you invest in, do thorough research yourself. Who’s behind the organization, how does the technology work, and what problem does it solve? Research carefully before putting your money in. Second, don’t buy just because the price is going up and then sell it again quickly—this kind of behavior easily falls into a bubble trap. Think long-term and only invest in projects you truly trust. Third, don’t put all your money into a single digital asset. Allocate your portfolio reasonably—invest across different sectors in a balanced way. Finally, when the price rises, withdraw a portion of your profits to ensure you still keep your original capital. That way, even if the market falls later, you won’t lose your principal.

In short, now you understand what a crypto bubble is. Be cautious about excitement in the market, and always make investment decisions in a systematic and wise way. Research thoroughly before taking action. That’s what I want to tell everyone.