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Stock Market Crashes: Will the Bubble Pop in 2022?

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Written by Timothy Sykes
Updated 12/29/2021 15 min read

Stock Market Crashes: Key Takeaways

  • Many market bubbles have turned into widespread crashes — study the past!
  • Are we in a stock market bubble? Learn the signs now.
  • Penny stock supernovas are like mini stock market bubbles — check out these charts…

Here’s how you can prep for a market crash with me — and claim a free gift!

I’m getting a lot of questions like — are we in a stock market bubble? Will the stock market crash? And will a crash cause the next Great Depression?

I don’t play guessing games. But I can prepare.

Learn what creates market bubbles and crashes what they mean for you NOW!

What Does a Bubble Mean in the Stock Market?

Tim Sykes in a boat in Italy checking the stocks on his top penny stocks list
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The market’s driven by supply and demand. Demand for assets drives prices higher, and more supply means lower prices.

When overexuberant and speculative buyers create a massive wave of demand, prices can soar.

That creates a stock market bubble. 

In a bubble, investors don’t buy stocks based on income, earnings, or growth — they buy on speculation that future prices will increase.

And it often means traders or investors overpay for assets.

When Was the Last Stock Market Crash?

The most recent market crash was in March 2020. COVID-19 shut down many parts of the world. Uncertainty spooked investors, creating a mass sell-off.

But the markets quickly recovered. Many new traders and investors saw the crash as an opportunity to enter the market at discount prices…

And many people were at home due to lockdowns with plenty of time on their hands, plus extra cash thanks to government-issued stimulus checks.

Combine that with new trading apps like Robinhood and multiple major brokerages going commission-free, and you have a lot of new buyers.

Free trading apps make trading and investing like a game. And people can do it right on their smartphones

Some brokers even offer fractional shares — which allows even more buyers into the market with less money. In 2020, the wave of new buyers led to all the major indexes hitting new all-time highs. The volume and volatility were great for prepared traders.

But the markets can’t go up forever…

What Causes a Stock Market Crash or Correction?

Tim Sykes prepares for a potential market crash in 2022
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Once buyers bid prices up high enough, fewer buyers are willing to pay those prices.

Without buyers, assets crash. 

And once investors start to take profits, declining prices can trigger margin calls and forced selling. Sometimes a black swan event can cause a market crash — like the one that caused the 2020 crash.

There’s a psychological reason for market bubbles and crashes. Never underestimate the power of…

Herd Mentality

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A stock market bubble is like a penny stock supernova. Buyers believe the hype. They follow ‘guru’ trades and tips on buying stocks instead of trading patterns and using a rule-based strategy.

Continued market highs can give traders a sense of euphoria and FOMO. So they keep buying, believing there’s no better time than now to buy.

Herd mentality can also create crashes. Once prices decline, mass panic can set in and sellers start chasing lows to get out.

Don’t know about penny stock supernovas? Get my “Penny Stocking Framework Part Deux” DVD.

What Are the Consequences of a Stock Market Bubble?

the bottom line outstanding shares
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Stock market bubbles eventually pop — and they can have devastating consequences…

Steep Drop in Prices and Major Losses

A stock market crash leaves many investors with losses. Sadly, it’s usually the least-educated investors who buy at the top that end up with the biggest losses.

Most people who bought late won’t sell when the market starts to correct. They wait until the market tanks further. That only adds more fuel to the sell-off.

It’s why I prefer to trade instead of invest. I never recommend anyone hold and hope. My rule #1 is to cut losses quickly. If you follow trading rules, it can help protect you from huge losses.

I trade safely and expect the worst from every stock and every company. 

Learn more about trading with my FREE penny stock guide here.

Market Crashes Can Cause a Recession or Depression

The biggest stock market crashes in history led to a recession or depression.

It happens when the poor monetary policy that started the bubble dries up. Or when people lose their life savings, which can lead to them losing their homes or other assets.

Market crashes can affect more than just stock prices.

The losses can ripple through the economy and affect consumer confidence and jobs. Sometimes a full economic recovery can take years or even decades.

Stock Market Bubble 2022: Will the Stock Market Crash?

what are penny stocks the bottom line
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There’s a lot of talk about a market crash right now. There are so many overextended markets — housing, oil, the stock market.

Cryptocurrencies had a massive run too, followed by a big crash.

Does that mean the stock market will crash in 2022?

I don’t play guessing games. But I’ve seen overextended markets, hype, and exuberance before. And stock market bubble indicators from the past can give you an idea of the future.

Here are some examples…

Stock Market Bubble Indicators

One stock market bubble indicator is an increase in initial public offerings (IPOs). Companies want to take advantage of the market highs and exposure to investors at inflated prices.

Some of these companies may even be scams and not live up to the hype they play up to enter the market.

High speculation can be another indicator. Investors enter the market speculating that economic or technological changes can increase a stock’s value in the future. Speculators think they’re getting in early…

It’s reminiscent of a penny stock pump. Penny stock ‘investors’ think they’re buying the next Microsoft or Pfizer.

Look at these examples of penny stock supernovas. They’re like a stock market bubble on a smaller scale.

HUMBL, Inc. (OTCPK: HMBL)

HMBL rode a huge wave of hype in 2020 and 2021. Before it changed its ticker to HMBL, it traded under the ticker TNSP. It went supernova more than once. I made over $130,000 in profits on my TSNP trades. See my HMBL trades here.

Here’s what a bubble and crash look like:

HMBL chart
HMBL chart: 1 year, daily candle — courtesy of StocksToTrade.com

Notice what happens when the hype and exuberance fade? The stock goes back where it started, volume fades, and nobody cares.

OTCs aren’t the only stocks that can go full supernova. Listed stocks can run on hype too. Check out this huge spiker…

Digital World Acquisition Corp. (DWAC)

DWAC was a massive supernova. It’s a SPAC linked to former President Donald Trump. And once news spread that he was bringing a social media company public through a merger, the stock soared.

The next day more buyers came in and pushed it even higher. In two days the stock went from roughly $13 to $175. Investors thought they were buying the next Twitter.

But once all the buyers were in, they wanted to take profits. And short sellers started pressuring it.

This is what mass hysteria looks like. Check out this chart:

DWAC chart: 6-month, daily candle — courtesy of StocksToTrade.com

If a stock’s up 10–20 times in a short time, it’s likely a bubble. It’s great to take advantage of these moves on the way up. But don’t hold and hope when a trade goes against you.

If you’re missing out on supernovas like these, apply to join my Trading Challenge today. My students and I take advantage of moves like this on the way up and the way down.

Now compare those charts to the SPDR S&P 500 ETF Trust (SPY) five-year chart. Since March 2020, it’s climbed higher and faster than prior years:

SPY chart: 5-year, daily candle — courtesy of StocksToTrade.com

Are We in a Stock Market Bubble?

When you’re in a stock market bubble, the whole country gets involved. It’s mass hysteria.

Charles Mackay touches on market hysteria in his book “Extraordinary Popular Delusions and the Madness of Crowds.” (As an Amazon Associate, we earn from qualifying purchases.)

So are we in a market bubble now? 

I’ve seen a lot of market bubble indicators over the last two years. Have we reached mass hysteria? I don’t know. Stocks can always go higher than you think.

But I’m looking for any signs of topping — failed breakouts, support levels breaking, and lower highs.

If you haven’t seen market bubbles or penny stock supernovas, you haven’t studied. There are plenty of past examples you can learn from…

Learn From Stock Market Bubbles and Crashes in History

History doesn’t repeat exactly, but it does rhyme. And there are plenty of big stock market bubbles from history you can study…

During the South Sea stock bubble, people used to crash their horse carts in front of the guy in charge of the stock. Then they’d fake injuries to try to get some stock out of him.

stock market bubble south sea

In the big tulip bulb bubble in the 1600s, tulip bulb prices were bid up by speculation and hype. Some became worth as much as a large home. But after three years they were only worth the value of the flower.

stock market bubble tulip

This is why education, discipline, and patience matter when you trade. You need to resist chasing stocks and hype. Think you missed an opportunity? Use that to learn and study so you can catch the next one.

Frequently Asked Questions About Stock Market Bubbles

Let’s go over some frequently asked questions about stock market bubbles and how to trade them…

What Goes Up When the Stock Market Crashes?

When the markets go down, investors usually look for somewhere “safe” to put their capital, like gold and U.S. Treasury bonds. Stocks of companies that make consumer staples can even go up as markets crash. People still need essentials to live, even during a crash.

What Happens When a Stock Price Goes to Zero?

Usually, before a stock reaches zero, it’s delisted from major exchanges and trades on the OTC markets. It might find interested investors there. But when a stock price goes to zero it’s worthless and there’s little chance of the company surviving.

When Will the Next Stock Market Bubble Burst?

Nobody can predict the future. I prefer to react to the market. We don’t know when it will end, but we do know the markets can’t go straight up forever. Study the past and be ready to react when the time is right.

Bottom Line: Can You Benefit From a Market Crash?

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The markets constantly change. There are bear markets, bull markets, corrections, and market bubbles. You have to adapt to learn to trade through it all.

I don’t invest and hold long term. But I still watch the major markets, because three out of four stocks follow the market. Preparation is key so you can be ready to take advantage of any trading opportunity.

It might mean you have to switch up your strategies. I’m considering short selling if the market crashes in 2022. I opened a new account to prepare. Get bonuses when you open an account here.

For the ultimate trading education — apply for my Trading Challenge. It doesn’t matter if the market’s making new highs or crashing. We find the best penny stocks to trade and take advantage of repeating patterns.

Will we see the market crash in 2022? Let me know what you think in a comment below!


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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”