When the market was flooded with news that the price of Bitcoin had broken through $104,000, investors once again focused their attention on this crypto asset known for its extreme volatility. In traditional investment concepts, such highly volatile assets seem to run counter to value investment, but is that really the case? In this tumultuous crypto game, whether value investment strategies can identify “asymmetric” opportunities, that is, chances where potential gains far exceed potential losses, has become a hot topic of discussion at present.
Where do the asymmetric opportunities of Bitcoin come from?
Looking back on the development history of Bitcoin, its price trend has been like a roller coaster, with many astonishing scenes of sharp drops followed by strong rebounds. In 2011, the price of Bitcoin plummeted from $33 to $2, a decline of as much as 94%. The market was in a state of widespread distress, developers fled, and the prospects for projects were bleak. However, if investors had the courage to “bet” $1,000 at that time, when the price of Bitcoin broke through $10,000 many years later, this investment would have appreciated to $5 million, and the return would be astronomical.
From 2013 to 2015, the world’s largest Bitcoin exchange, Mt.Gox, collapsed, and 850,000 Bitcoins “vanished” from the blockchain. The media all declared that “Bitcoin is over”, and its price plummeted from $1,160 to $150, a decline of over 86%. But who could have imagined that by the end of 2017, the price of Bitcoin had soared to $20,000, bringing huge wealth to those who held on.
In 2017-2018, the IO bubble burst, and Bitcoin plummeted from a historical high of nearly $20,000 to $3,200, a decline of over 83%. Wall Street analysts are sneering and mocking, retail investors are being liquidated, and the crypto market has fallen into a dead silence. But the subsequent recovery once again proved that the potential of Bitcoin far exceeded imagination.
From 2021 to 2022, a series of “black swan” events such as the collapse of Luna, the liquidation of Three Arrows Capital, and the explosion of FTX successively hit the crypto market, causing the price of Bitcoin to drop from $69,000 to $15,500. The fear and greed index once dropped to the extreme fear zone of 6, and on-chain activities were nearly frozen. However, by the end of 2023, Bitcoin had rebounded to $40,000. After the ETF was approved in 2024, it soared to over $100,000 today.
This asymmetric opportunity mainly stems from three core mechanisms. Firstly, the Bitcoin market is open 24/7 without a circuit breaker mechanism, market maker protection or a guarantee from the Federal Reserve, which has infinitely magnified human greed and fear.
During a bull market, the FOMO (Fear of Missing Out) mentality drives retail investors to frantically chase high prices, resulting in severe price overdraft. During a bear market, FUD (Fear, Uncertainty, Doubt) sentiment prevails, investors panic and sell off, and prices are overly depressed, deviating seriously from their true values, thus creating space for value investors to seek asymmetric opportunities.
Secondly, despite the sharp fluctuations in Bitcoin’s price, the underlying infrastructure remains exceptionally stable. Since its birth over a decade ago, its blockchain has had almost no record of outages. Despite major crises such as the collapse of Mt.Gox, the failure of Luna, and the FTX scandal, it has still been able to generate a new block every 10 minutes and operate as usual. This means that Bitcoin does not have a true risk of going to zero, forming an ideal investment structure with limited short-term downside risk and broad long-term upside potential.
Thirdly, Bitcoin has many intrinsic values that are often overlooked by the market. The scarcity of its algorithm determines that the total quantity is only 21 million pieces, and the supply is strictly controlled through a halving mechanism. Protected by the world’s most powerful Proof of Work (PoW) network, the production cost is quantifiable. With a powerful network effect, by the end of 2024, over 50 million addresses had non-zero balances, and transaction volume and computing power kept setting new highs. It has also gained recognition from mainstream institutions and even sovereign states. For instance, MicroStrategy has included it in its balance sheet, BlackRock and Fidelity have launched spot Bitcoin ETFs, and El Salvador has adopted it as legal tender. These intrinsic values make Bitcoin prone to an “oversold” state when its price is undervalued, providing opportunities for value investors to get involved.
Can Bitcoin be used for value investment?
From the perspective of traditional value investment, Bitcoin lacks cash flow, a board of directors, factories and dividends, and seems unable to meet the standards of value investment. However, when it comes to the essence of value investment, that is, seeking assets whose prices are lower than their intrinsic values and holding them for the long term, and making profits when their value emerges, Bitcoin might be an excellent target for value investment.
On the supply side, the scarcity of Bitcoin is the cornerstone of its value. The mechanism of fixing the total amount at 21 million and halving it every four years has continuously reduced its inflation rate. After the halving in 2024, the annual inflation rate has dropped below 1%, making it scarcer than gold.
The stock-Flow Ratio (S2F) model shows that after each halving of Bitcoin, the S2F ratio increases and the price rises significantly accordingly. For example, after the halving in 2012, the price soared from about $12 to over $1,000 within a year. In 2016, it was halved and the price climbed from about 600 US dollars to nearly 20,000 US dollars within 18 months. In 2020, it was halved and the price rose from about $8,000 to $69,000 18 months later. However, this model only focuses on supply and ignores the demand factor, which has certain limitations.
The demand side also plays a key role in assessing the value of Bitcoin. According to Metcalfe’s Law, the value of the Bitcoin network is proportional to the square of the number of users. By the end of 2024, over 50 million addresses had non-zero balances. In February 2025, the number of daily active addresses rebounded to approximately 910,000, reaching a three-month high. The growth in the number of active addresses and non-zero addresses, as well as the increase in the capacity of the Lightning network and the volume of off-chain payments, all demonstrate the strong demand for Bitcoin. The increase in users drives active transactions, enriches the ecosystem, and further enhances its value. However, factors such as tightened global regulation, the emergence of new technologies (such as CBDC, Layer-2 alternatives), or the depletion of liquidity may also lead to shrinking demand and a decline in value. Therefore, only by closely integrating supply and demand can a framework for accurately assessing the value of Bitcoin be constructed, and investment opportunities when price and value are disconnected can be precisely captured.
The essence of value investment and Bitcoin investment
The core of value investment lies in constructing an asymmetrical structure with limited risk and significant return within the gap between price and value. Unlike trend investing, which relies on market inertia and momentum trading to bet on short-term fluctuations, value investing requires investors to remain rational when market sentiment deviates significantly from fundamentals, deeply assess the long-term value of assets, buy decisively when prices are undervalued, and hold patiently.
The high volatility of Bitcoin is not an obstacle to investment at all; instead, it creates unique opportunities. The panic caused by its price fluctuations is often a manifestation of market mispricing. True value investors will keenly seize the opportunity at this time and quietly make their moves. Understanding the close connection between value investment and asymmetry enables one to discern why Bitcoin can be an object of value investment. When the market was shrouded in fear and the price of Bitcoin dropped below the level suggested by the comprehensive valuation model, asymmetry opened the door to investment, providing investors with a rare opportunity to reprice undervalued assets.
In the current market environment, the value investment logic of Bitcoin is becoming increasingly prominent. On the one hand, the US Treasury Secretary stated that the trade negotiations with China have made substantive progress. This positive signal may have a positive impact on the global economy and market sentiment, and subsequently affect the Bitcoin market.
On the other hand, Bitcoin itself also presents many favorable factors. For instance, the CEO of Coinbase disclosed that although the company had repeatedly discussed the plan to invest 80% of its balance sheet in BTC, it refused to do so to avoid endangering liquidity and core operations, which indirectly reflects the significant position of Bitcoin in the eyes of institutional investors. Canadian technology company Matador plans to raise 3 million Canadian dollars. Part of the net proceeds are intended to be used to increase its holdings of Bitcoin, demonstrating the company’s recognition of the investment value of Bitcoin. Analysis indicates that the selling pressure on Bitcoin miners has dropped to the lowest level since 2024, suggesting a reduction in the supply of Bitcoin in the market. With demand remaining unchanged or increasing, this could drive up the price.
Of course, investing in Bitcoin is not without risks. The extreme volatility of its price may cause investors to suffer huge losses in the short term, and the regulation of the cryptocurrency market is still not perfect, presenting policy risks. However, for those investors who have a deep understanding of the inherent logic of Bitcoin, possess strong emotional control and a long-term investment belief, the asymmetric opportunities in Bitcoin investment might just be the key to achieving excess returns. They remain calm in the storm of the market, adhere to the concept of value investment, and wait for the further release of the value of Bitcoin.
Related Topics:
