This is a good read. https://www.amazon.com/Extraordinary-Popular-Delusions-Charl.... Market participants often do know there's a bubble. However, if your neighbor keeps making more and more money selling tulips (that was a thing), then you will be tempted to buy some tulips yourself, knowing full well that you are commanding an absurd price.
Bubbles can be more "musical chairs" than rational pricing.
Bubbles can be more "musical chairs" than rational pricing.