[steven777400]

Having not heard of this model before, I'm very surprised how tightly the curve fits, to the point of being sceptical (it's even got the "little" ups and downs" it seems).

Traditionally, the idea with a bubble is that everyone (well, almost everyone) knows it's a bubble, but no one seems to know when it will pop or how far it will fall.

Would this same model have fit the 2008 stock market collapse? Would it have accurately showed when and where the bottom was?

Would this same model have fit the BTC curve as well if the dataset had started 100 or 200 days earlier or later?

Just some curiousity about a model I'm hearing of for the first time.

[dragontamer]

The issue with the 2008 bubble is that it was in Mortgaged Backed securities (and related derivatives). The Stock Market crashed because when the MBSes crashed, big banks were unable to give loans out to businesses. Without loans, many businesses were unable to pay their employees, etc. etc.

The bubble was specifically in Credit Default Swaps, a derivative of the bond market. The problem here is that CDSes were untracked and unregulated. No one knew there was a bubble because there was no way to see the "fair price" of a CDS. Companies were making deals on CDSes in their backrooms, away from exchanges.

When all of the companies involved in CDSes failed (because people failed to pay their subprime mortgage loans), it killed the banking industry... even those unrelated to the bubble. When your business partner goes bankrupt, you're also in danger. Again: there were lots of factories who couldn't get a loan to pay their workers... because the bank they relied on died in the whole crisis.

This leads to factory closings, lots of people losing their job, and then a general Stock market crash.

But again, Stocks weren't the bubble in 2008. The Credit Default Swaps in the bond market was the problem.

[thatthatis]

2008 wasn't a bubble so to speak. It was driven by de-levering contagion.

You'd do better to apply it to a 2001 tech index.

The difference is a bubble is driven by greed, and "greater fool" behaviors turning to fear and panic selling. De-levering contagion is driven by a position going down triggering margin calls which necessitate selling other positions which drive down prices which furthers the cycle.