Prices reflect what people feel as much as what they know. Fear and greed spread from trader to trader, and crowds amplify both.
That is why a market can overreact to news in either direction, and why the same information can produce very different moves on different days.
Rising prices attract attention and new buyers, which pushes prices higher still. Falling prices trigger stop-losses and forced selling, which pushes them lower.
This feedback loop is why trends often run further than fundamentals alone would suggest.
Speculation means buying because you expect someone else to pay more later, not because of what the asset is worth today.
In moderation it adds liquidity and helps prices react quickly. When it dominates, prices detach from value.
A bubble forms when speculation pushes prices far above any reasonable value. Everyone can see prices rising; few can see where they end. Bubbles are usually obvious only afterwards.
Fear spreads faster than greed. When prices fall sharply, selling triggers more stop-losses and margin calls, which trigger more selling.
Many of the steepest drops in history were driven more by emotion than by new information, and many partly recovered once the panic passed.
Fundamentals set a market's direction over time. Psychology sets the path it takes to get there, including every overshoot.
