Bitcoin's Undervaluation in a World of Expanding Global Liquidity

The Bitcoin market has entered a new era, defined by the structural shift introduced by spot Bitcoin exchange-traded funds (ETFs). Since their approval in early 2024, these instruments have redefined liquidity dynamics, valuation frameworks, and institutional behavior. With ETFs now holding approximately 7% of Bitcoin's total supply in custodial storage, the asset's price discovery mechanism has transitioned from onchain-driven analysis to a hybrid model incorporating offchain metrics like ETF flows, futures positioning, and macroeconomic liquidity signals according to research. This evolution has created a compelling case for Bitcoin's undervaluation, particularly when viewed through liquidity-driven valuation models and the lens of institutional adoption.

Liquidity-Driven Valuation Models: A Case for Undervaluation

Recent liquidity-based models suggest Bitcoin is significantly undervalued relative to global liquidity conditions. Trader Michaël van de Poppe's model, for instance, estimates a fair value of $165,000 for Bitcoin, far exceeding its current price of approximately $90,000. This discrepancy highlights a mispricing driven by the asset's underutilization in broader financial systems. Van de Poppe's approach ties Bitcoin's valuation to global liquidity expansion, a metric that has surged due to accommodative monetary policies and quantitative easing by central banks.

The MVRV-Z indicator, which measures the ratio of market value to realized value, further supports this narrative. As of October 2025, the MVRV-Z ratio stood at 2.31, signaling elevated but not extreme valuations. This suggests that while Bitcoin has appreciated significantly from its October 2023 low of $34,667 to a peak of $126,296, it remains within a range where further appreciation is justified by liquidity inflows. Traditional onchain metrics like the Network Value to Transactions (NVT) ratio, however, have become less reliable due to the dominance of offchain trading activity. Conversely, metrics such as Coin Days Destroyed (CDD) retain relevance, as they capture the movement of long-dormant coins-often a precursor to market tops and bottoms.

Institutional Adoption and ETF Dynamics

The rise of ETFs has been a cornerstone of Bitcoin's institutional adoption. In Q3 2025 alone, spot Bitcoin ETFs recorded net inflows of $7.8 billion, with further inflows expected in Q4. These funds have injected billions into the market, accounting for roughly 30% of total Bitcoin transaction value monthly. This institutional capital has tightened bid-ask spreads and stabilized price discovery, as ETFs maintain a close peg between share price and net asset value (NAV). For example, a $1 billion inflow into a spot ETF typically results in the purchase of approximately 15,000 BTC, directly influencing onchain liquidity.

Institutional buying has also shifted market behavior. Unlike retail-driven volatility, ETF inflows create sustained price adjustments, treating corrections as entry opportunities. This dynamic has reinforced Bitcoin's role as a digital safe haven, with major financial institutions forecasting prices ranging from $130,000 to $200,000 in the near term. The Federal Reserve's rate-cutting stance and global liquidity expansion have further amplified this trend, as Bitcoin increasingly behaves like a traditional risk asset with heightened correlations to equity markets.

Macroeconomic Factors and Systemic Risks

Bitcoin's valuation is inextricably linked to macroeconomic conditions. The asset's surge to $126,296 in October 2025 was fueled by institutional adoption, ETF approvals, and a broader shift toward digital safe havens. Favorable liquidity conditions, including low interest rates and quantitative easing, have made Bitcoin an attractive alternative to gold and cash in diversified portfolios. However, this correlation with traditional assets introduces new risks. For instance, a reversal in liquidity expansion or regulatory shifts could trigger large-scale ETF redemptions, creating a liquidity crunch.

Whale activity remains another wildcard. Large transactions often drive immediate volatility, but ETF inflows have introduced a more gradual, institutional-driven price dynamic. This creates a feedback loop where rising prices attract ETF inflows, which in turn may prompt profit-taking from whale holders. While this interplay is not inherently destabilizing, it underscores the need for caution in a market still adapting to its new structure.

Conclusion: A Compelling Case for Long-Term Exposure

Bitcoin's undervaluation, as evidenced by liquidity-driven models and institutional adoption, presents a compelling case for long-term exposure. The asset's integration into traditional financial systems-via ETFs, futures, and macroeconomic signals-has laid the groundwork for sustained appreciation. However, investors must remain vigilant to systemic risks, including regulatory overreach and custodial concentration. As global liquidity continues to expand, Bitcoin's role as a digital safe haven is likely to solidify, making it an essential component of diversified portfolios in an era of uncertainty.