Bursting bubbles or deflating balloons?

Using Bitcoin data, this presentation shows that speculative markets often rise quickly but decline slowly—more like deflating balloons than bursting bubbles

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Suggested citation

Hafner, Christian (2025). Bursting bubbles or deflating balloons?. Q2 ecosystem. Available at https://quantinar.com/course/892/bursting-bubbles-or-deflating-balloons or http://dx.doi.org/10.24818/IDA-CL/2025.56.

@misc{hafner2025, author = {Hafner, Christian}, title = {Bursting bubbles or deflating balloons?}, year = {2025}, howpublished = {Q2 ecosystem}, doi = {http://dx.doi.org/10.24818/IDA-CL/2025.56.}, url = {https://quantinar.com/course/892/bursting-bubbles-or-deflating-balloons} }
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2 components

	Bursting bubbles or deflating balloons? (pdf)	1.64 M
	Bursting bubbles or deflating balloons? (video)	59 min

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Description

This presentation explores the behavior of speculative markets using Bitcoin as a case study. Through simulation and model fitting, it demonstrates how rapid price inflation is often followed by a gradual decline—more akin to a "deflating balloon" than a "bursting bubble." The analysis incorporates volatility, non-normality, and dynamic tail risk, offering insights into the mechanisms driving these market patterns.