() price has risen sharply in recent weeks: the December futures contract reached a high of $105,325 on December 5 and the June 2025 contract reached $110,935 on the same day.
This increase in value has sparked debates among investors and analysts about the possibility of a Bitcoin bubble. Winhall Risk Analytics/OptionMetrics contributor Brett Friedman examines five factors to consider.
Is a Bitcoin bubble forming?
The characteristics of a financial bubble are often clear only in retrospect, but certain indicators can suggest an overheated market, Friedman suggests.
For example, a rising spread between implied volatility and out-of-the-money in-the-money volatility in options trading may indicate an overbought market. While this spread in Bitcoin has been increasing, it has not reached “abnormal levels.”
Futures curves can also provide information about market dynamics. A lagging curve, in which short-term contracts are priced higher than longer-term contracts, or a flattened contango curve, may indicate bubble-like behavior.
However, Bitcoin, which has been in contango since the introduction of futures in late 2017, has recently seen its deferred months outperforming nearby contracts. This trend suggests trader confidence in the sustainability of the rally well into 2025, which would not align with typical short-lived bubble patterns.
According to Friedman, another sign of fizz in the cryptocurrency market is an increase in volume and open interest.
Since the election, Bitcoin futures have seen increased activity, particularly in the Micro BTC contract favored by retail investors. Micro BTC contract open interest has increased nearly 2.5x since before the election, while full-sized contract interest has remained stable.
“This could indicate that traders are comfortable with the risk of deferred contracts and believe that the current rally will be sustained and last until 2025,” he said.
“This would not be the case if BTC were forming a bubble, as they are typically short-lived and confined to the leading end of the curve.”
Another factor that led Friedman to examine whether Bitcoin is truly in a bubble is the emergence of financial products related to high leverage and promises of quick returns. Products like MicroStrategy stock, Bitcoin-related leveraged ETFs, and the proliferation of crypto evangelists on social media could be indicative of speculative behavior.
So what is your conclusion?
While there are signs of an enthusiastic market for Bitcoin futures, it is not yet clear whether this constitutes a bubble.
“There is evidence that the market may indeed be frothy, but not necessarily on the path to a full-blown bubble.
“In the short term, it looks like BTC will need some new bullish fundamentals or will have to reclaim over $100,000 to reignite speculation that a bubble could be forming,” he concluded.
