Bitcoin's Sharpe Ratio has sharply declined to near zero, according to new analysis from CryptoQuant, indicating a period of heightened market uncertainty and risk repricing. The Sharpe Ratio, a key metric for evaluating risk-adjusted returns, falling to this level suggests that short-term rewards for holding Bitcoin are barely compensating for the associated risks.
Historically, similar declines in the Sharpe Ratio have preceded periods of strong risk-adjusted gains, as seen in 2019, 2020, and 2022. CryptoQuant analyst I. Moreno noted that this drop signals 'maximum uncertainty and the early stages of risk repricing,' potentially setting the stage for improved returns if market volatility normalizes.
Complementing this, on-chain data from Glassnode revealed that over 8% of all Bitcoin was moved in the past week, an event that has only occurred twice in the last seven years—during bear markets in December 2018 and March 2020. Joe Burnett, Director of Bitcoin Strategy at Semler Scientific, described this as 'one of the most significant on-chain events in Bitcoin's history.'
Bitcoin's price recently experienced a 23% drop, bottoming at around $82,000, before recovering slightly to $89,000. While the Sharpe Ratio's decline doesn't guarantee a market bottom, it highlights an increasingly attractive risk-adjusted landscape for forward-looking investors.
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