The Year of the "Bubble" in the Global Financial Market: Decoding 11 Events That Reveal Market Instability 2025

2025 has become the year of privilege for investors—not because of massive profits, but due to the “bubble” that dominates the global financial markets. From digital assets to AI giants, the market shows the same pattern: prices surge rapidly, capital flows in chaotically, then collapse when confidence wavers. Bloomberg has compiled 11 major events of the year that reveal the depths of this “bubble,” from global bets to risk management failures.

Digital Assets: When Politics Turn into Markets

In early 2025, hopes for digital currency reform sparked crypto market frenzy. Investors tried to bet on “assets related to Trump,” whether Trump family tokens or American Bitcoin. Initial returns seemed real, but reality proved this strategy was only a temporary boom.

Melania Trump tokens fell nearly 99% in value, while American Bitcoin dropped about 80% from its peak. Politics brought short-term popularity, but the laws of speculation in digital markets are brutal: price rises → leveraged capital inflows → liquidity evaporates. This is the clearest example of a “bubble,” regardless of whether assets have “supporters” in the White House or not.

Artificial Intelligence: When Belief Runs Out

In November, legendary investor Michael Burry revealed his short positions (put options) in Nvidia and Palantir Technologies—key components of the long AI boom. Nvidia’s options were 47% below the closing price, Palantir 76%. This disclosure was like a spark igniting long-standing concerns about “overvaluation of AI giants.”

Following the announcement, Nvidia plummeted, and worries about an “AI bubble” grew. The market, dominated by a few AI stocks and massive passive capital flows, posed hidden risks: when momentum shifts, prices could fall sharply.

Defense Stocks: From Burden to Potential

Geopolitical shifts triggered another “bubble” in European defense sectors. Under new political pressures, many fund managers who previously avoided this asset class due to ESG concerns shifted their stance. German Rheinmetall AG and Italy’s Leonardo SpA surged 150% and 90%, respectively.

This is a clear example of a “bubble” driven by policy change: as risk perceptions shift, capital flows follow swiftly. The credit market quickly rebranded “defense” from a contentious issue to a “public good.”

Gold: “Rescue Signal” or “Victim of Manipulation”

In October, fears of currency devaluation pushed gold and Bitcoin to record highs simultaneously for the first time. Some investors saw these assets as “hedges against devaluation.” However, after policy announcements, capital flows shifted.

Bitcoin declined, the dollar stabilized, and US Treasury bonds performed best. Gold continued to rise, but the “bubble” around inflation hedging was over once real data emerged. Investors must realize that “distrust” and “demand for safe assets” often occur together—but not always.

Korean Stock Market: Boom from Foreign Capital, but “Home Out”

South Korea’s stock market soared 70% since the start of the year, amid President Yoon Suk-yeol’s “KOSPI 5,000” plan. Foreign capital flowed in significantly, viewing the country as “a major AI trading hub in Asia.”

However, this “bubble” concealed deeper issues: retail investors in Korea are selling out. They poured $33 billion into US stocks and sought higher-risk assets like digital currencies. This is a stark warning: the “bubble” in stocks may mask global market distrust.

“Bubbly” Bitcoin: The Game Between Jim Chanos and Michael Saylor

The speculative game between short seller Jim Chanos and MicroStrategy’s Michael Saylor has become a “referendum” on capitalism in the crypto era. Chanos argued that MicroStrategy’s trading was overpriced relative to its Bitcoin holdings, so he decided to short and publicly announced it.

Initially, MicroStrategy’s stock rose, but as the company increased digital asset holdings and prices declined, its premium disappeared. Chanos’s bet started to pay off. Here, the “bubble” of overconfidence—when confidence wavers, the price premium no longer offers an advantage.

Japanese Bonds: Contrarily, Now a “Short Seller’s Paradise”

For decades, shorting Japanese government bonds was seen as a “partner” in destroying confidence: Japan’s huge debt meant interest rates should rise. But ultra-loose monetary policy persisted for years.

By 2025, the “bubble” in Japanese bond yields burst: 10-year yields exceeded 2%, a multi-decade high. The $7.4 trillion Japanese bond market became a “paradise” for shorts. The Japanese bond index fell 6% this year, making it the worst-performing bond market globally.

Credit Markets: “Internal Conflict” Creates Broad Profits

This year’s best returns in lending didn’t come from “bets on corporate recovery,” but from “internal conflicts” among creditors. Firms like PIMCO and King Street Capital Management orchestrated precise “games” with Envision Healthcare, under KKR.

By “changing sides” to support new debt issuance, they converted high-value assets like Amsurg into collateral. Selling to Ascension for $4 billion yielded about 90% return. This illustrates a “bubble” in credit markets: when conditions relax and creditors are scattered, they can “escape contractual obligations.”

Fannie Mae and Freddie Mac: From Control to “Hope for Restructuring”

Long under US government control, Fannie Mae and Freddie Mac were traded off-market after the 2008 crisis. When Trump returned to the White House, the market “collapsed” suddenly. From the start of the year to September’s peak, stock prices surged 367%.

This is a prime example of a “bubble” driven by policy change: hopes for “restructuring” reflected in prices, even though IPO timing remains uncertain. Bill Ackman proposed a restructuring plan to the White House, showing some market optimism.

Turkish Carry Trade: Crashed in 24 Hours

One of the clearest examples of this year’s “explosion” of the “bubble”: Turkish bonds yielded over 40%, attracting billions from institutions like Deutsche Bank and Millennium Partners—all vanished in a single day.

On March 19, Turkish police detained Istanbul’s opposition mayor. The Turkish lira’s sell-off was massive. The central bank couldn’t stop it. $10 billion in capital fled that day. A warning sign that a policy-driven “bubble” can burst rapidly.

Credit Markets: The Cockroach Signal Is Up

In 2025, the credit market experienced multiple “small crises.” Companies once seen as “ordinary borrowers” faced financial trouble: Saks Global restructured $2.2 billion in bonds; New Fortress Energy’s convertible bonds lost 50%. Misjudgments, fraud, and optimism were common.

Investors must ask: why invest in these companies when evidence of their ability to repay is almost absent? JPMorgan Chase CEO Jamie Dimon issued a clear warning: “When you see one cockroach, there may be many hiding in the dark.” The “cockroach” risk may return as a major concern.

2025 has demonstrated one of the key lessons of markets: “bubbles” are not caused by visible “disappearances,” but by “deep-seated beliefs” and “policy shifts” that drive capital inflows. When confidence wavers or policies change, everything—from prices to capital flows—reverses. Traders in “bubble” markets must realize that “bubbles” are not accidents but intrinsic market features.