Melt Up

A melt-up is a term in financial markets used to describe a rapid and unsustainable surge in asset prices, typically driven by a combination of investor behavior and market dynamics rather than strong underlying fundamentals. It often occurs when investors, fearing they might miss out on potential gains, rush to buy stocks or other assets, driving prices higher. This fear of missing out (FOMO) can lead to irrational exuberance, where prices rise at a pace that outstrips the intrinsic value of the assets. Melt-ups are characterized by heightened market volatility, excessive optimism, and often significant participation from retail investors. They are distinct from typical bull markets because the price increase in a melt-up is typically short-lived and fueled more by emotion than economic or corporate growth factors.

Melt-ups are frequently seen in the later stages of a market cycle, often preceding a market correction or crash. The unsustainable nature of these price increases means that they are typically followed by a sharp downturn as the market adjusts to align with fundamentals. This pattern can lead to significant losses for investors who enter the market during the peak of the