Many investors did not realise that these new instruments were inflating a speculative bubble on an unprecedented scale and  BIS Review 67/2008  1  lost all their money when the market collapsed after two years.
The Tulip Mania illustrates how imbalances can develop when previous constraints are lifted – in this case by new financial tools allowing investors to take large speculative positions. But it also illustrates the role of naive optimism and even greed. 5. Misguided incentives are often also at the root of growing imbalances, because of conflicting micro and macro perspectives.