Why do market bubbles burst?

Answer: Bubbles burst when prices rise so high that new buyers stop paying.

Bubbles burst when everyone tries to sell at the very same moment. — Wrong. A rush of selling is what a crash looks like, and it can make the fall steeper once prices start dropping. But the first break is that new buyers stop paying ever-higher prices, so holders find few takers. Selling then spreads because each drop frightens more holders, not because everyone planned to sell at the same instant.

Bubbles burst when prices rise so high that new buyers stop paying. ✓ — Correct! A bubble keeps going only while buyers keep paying higher prices than before. When prices climb far beyond what the assets can earn or are really worth, new buyers stop paying, demand dries up, and holders who need to sell find few takers. Prices then fall, and the selling can feed on itself once the drop begins.

Bubbles burst when illegal speculators secretly dump the assets they bought. — Wrong. Illegal speculation can happen alongside a bubble and can make it worse, but a bubble does not need lawbreaking. Prices can climb far above what assets are really worth in fully legal markets when optimism and herd buying take over. The break comes when buyers will no longer pay ever-higher prices, not when a hidden illegal group starts selling.