The term bubble is not new, but it is one that has become attached to Bitcoin and a number of cryptocurrencies. Bubbles have existed through history - from tulip bulbs to the stock market, but with Bitcoin it was based around the huge price rises over the years.

The term bubble can probably be well attributed to Bitcoin because many commentators declare that this digital currency is worth zero, so the fact that it can be bought for $60,000 a coin would predispose it to be a bubble asset.

However, people calling crypto a bubble are often informed by a belief that the sole purpose of cryptocurrency is speculation. There is a lot of speculation, and it was a primary mover of the market, but that is changing.

Bubbles can come in and totally collapse a market to the point where it never reaches that price again, or they can be small blips along the way where the price of the asset rises massively, and then falls away. For Bitcoin, this has happened a number of times. Bitcoin has reached as high as $20,000 and then fallen away to near $3,000, with this collapse being called a bubble burst.

Despite this bubble burst, Bitcoin has come back and tripled its value near its top, making many skeptics retrace their calls of the asset being a bubble, As applications for Bitcoin increase, as well as adoption and usage, so the intrinsic value of the coin comes more in line with its current value.

Aspects such as DeFi, and other blockchain applications, like NFTs, mean that the cryptocurrency side of things with the market prices makes more sense. There is a feeling that the base technology will start to revolutionize former financial sectors meaning the price of cryptocurrencies could rise higher than when they were called a bubble.

ELI5 Bubble

Bubbles happen when an asset's price gets very high. It's probably worth less in reality. When the bubble bursts, an asset will go down in price, closer to its real price.