Is Bitcoin in a Crypto Bubble Stage?

【TL; DR】

• Bitcoin’s rise is not a bubble but a long-term growth driven by strong fundamentals.
• Institutional investments and Bitcoin ETFs have made the market more stable.
• Technical indicators confirm Bitcoin is still fairly valued and not in a bubble.

Introduction: Is the rise of Bitcoin a new bubble or a new cycle?

Every time Bitcoin’s price rises sharply, people ask, “Is Bitcoin in a bubble?” Over the past decade, Bitcoin has gone through many boom-and-bust cycles. Each time it reaches a new all-time high, there are concerns that the price is unsustainable.

However, Bitcoin has not disappeared. Instead, it has grown stronger, attracting institutional investors and becoming more integrated with the financial system. The market is evolving, and investment behavior today differs from previous cycles.

So, is Bitcoin’s current rally a sign of another speculative bubble? Or is it part of a healthy market cycle driven by solid fundamentals? This article will analyze supply and demand, institutional adoption, macroeconomic factors, and technical data to determine if Bitcoin is in a bubble.

The conclusion? Bitcoin’s rise is not just speculation. It is supported by fundamentals and long-term trends.

The three key elements prove that Bitcoin has not entered the bubble stage.

1. Bitcoin Halving Effect: Structural Supply Shock in the Market

Bitcoin’s supply model is one of its key economic principles. Every four years, Bitcoin undergoes a “halving,” reducing the number of new Bitcoins mined by 50%. This creates a supply shock, reducing the number of new coins entering the market while demand grows.

Looking at history, Bitcoin has experienced major bull runs 1-1.5 years after each halving event:

• 2012 halving → 2013 bull market: Price surged from $10 to over $1,000.
• 2016 halving → 2017 bull market: Price climbed from $400 to $20,000.
• 2020 halving → 2021 bull market: Bitcoin peaked at $69,000.

The most recent halving occurred in April 2024, meaning 2025 could be the next major bull market year. Historically, Bitcoin takes time to react to halvings, and current price increases may be part of this natural cycle rather than a speculative bubble.

In April 2024, Bitcoin experienced its fourth halving, which means that 2025 may become the main outbreak period of the bull market. Historical data shows that the supply shock brought about by halving does not immediately reflect in the price, but is released about a year later. The current price increase is a rational response of the market to this cyclical change, rather than an irrational bubble.

2. Institutional investment influx: a more mature market

Compared to previous bull markets, the biggest difference in the Bitcoin market is the deep participation of institutional investors. This is fundamentally different from the speculative bubble driven by retail investors in 2017.

(1) The launch of Bitcoin ETF
In 2024, Bitcoin spot ETF was officially approved, which is a major breakthrough in the crypto market, making it easier for traditional financial institutions to allocate Bitcoin. The emergence of ETFs:

• Lowered the investment threshold, allowing more institutional funds to directly allocate Bitcoin
• Brought stable capital inflows, reducing the risk of market volatility
• Increased market compliance, with Bitcoin gradually becoming one of the mainstream asset categories

(2) Listed companies increase their Bitcoin holdings
• MicroStrategy has become the world’s largest corporate Bitcoin holder, firmly believing in the long-term value of Bitcoin. • Companies such as Tesla and Square have also purchased Bitcoin, signaling an increasing acceptance of crypto assets by enterprises. • Other companies and institutions are continuously increasing their holdings, with traditional financial giants like BlackRock and Fidelity also making deep inroads.

Institutional deep involvement reduces the speculative nature of the market, increases long-term stability, and forms a sharp contrast with typical bubble markets.

3. Macro-economic Background: Bitcoin’s Safe-haven Properties

Bitcoin is not just a speculative asset, it is increasingly seen as the ‘digital gold’ in the context of global economic uncertainty.

• Global inflation pressure still exists: In the past few years, central banks around the world have implemented large-scale quantitative easing, exacerbating the risk of currency devaluation. Bitcoin’s fixed supply (with an upper limit of 21 million coins) gives it anti-inflation properties.

• Impact of USD liquidity: If the Federal Reserve starts cutting interest rates in 2025, global liquidity will increase, and Bitcoin may see a new round of capital inflows.

• Bitcoin becomes a global store of value tool: Investors in more countries see it as a means to hedge financial uncertainty.

These factors together shape the fundamentals of Bitcoin as a safe-haven asset, making it not reliant on short-term speculation like bubble assets, but possessing long-term financial attributes.

Technical data analysis: The market has not entered the bubble zone

In addition to fundamentals, we can also verify whether Bitcoin is in a bubble state through technical indicators.

Power-Law Model: Bitcoin is still on a healthy growth trajectory
The power law model is a mathematical model based on the long-term growth trend of Bitcoin, indicating Bitcoin price It will fluctuate along a long-term exponential growth curve.

The current bitcoin price is still within the growth trajectory of the model and does not deviate far from the trend line, as in the bubble stages of 2017 and 2021.
In other words, Bitcoin’s rise is part of a long-term trend, not a short-term market bubble.

MVRV Z-Score: The market hasn’t overheated yet
MVRV Z-Score is an important indicator to measure whether the Bitcoin market is entering a bubble stage.

• When the Z-Score is greater than 8, it usually means that the market is overheated (bubble phase)

• When the Z-Score is between 2 and 6, the market is in the reasonable valuation range

Based on the current data, the MVRV Z-Score is still within a healthy range, far from the levels seen during previous market bubbles. This indicates that the rise of Bitcoin is not irrational speculation, but built upon a healthy market structure.

Conclusion and Reflection

The current market environment is fundamentally different from the bubble periods of 2017 and 2021. The rise of Bitcoin is not driven by pure market frenzy, but is supported by changes in supply and demand, institutional adoption, macroeconomic trends, and technological upgrades.

For investors, now is a market phase worth paying attention to. Depending on different investment preferences, different strategies can be chosen:

• Long-term investors: Buy on dips and hold (HODL) to avoid missing long-term gains due to short-term fluctuations.
• Short-term traders: Participate in swing trading with small positions, but be cautious and do not let emotions affect trading decisions.
• Newcomers: Adopt a phased investment strategy to avoid a one-time investment and reduce the risks brought by short-term market fluctuations.

The long-term trend of the Bitcoin market is still positive, but maintaining rationality and avoiding chasing highs and panic selling is the best strategy to deal with market fluctuations.