Bitcoin's risk-adjusted return metric, the Sharpe ratio, has plunged to -10, its lowest level since March 2023, according to data from CryptoQuant. This reading indicates that the risk of holding Bitcoin is significantly outweighing its recent returns, creating an extreme risk-to-reward environment for investors.
CryptoQuant analyst Darkfost highlighted the development on social media platform X, noting that this zone has historically aligned with the final phases of broader bear markets, such as those seen in late 2018/early 2019 and late 2022/early 2023. "The Sharpe ratio has just entered a particularly interesting zone, one that has historically aligned with the final phases of bear markets," Darkfost stated. However, he cautioned that this is "not a signal that the bear market is over, but rather that we are approaching a point where the risk-to-reward profile is becoming extreme."
The deteriorating metric coincides with a period of significant price volatility and selling pressure. Bitcoin's price recently dipped to $60,000 before recovering slightly to around $71,000. Despite this bounce, the cryptocurrency remains down approximately 44% from its October 2025 peak of $126,000.
Supporting the bearish sentiment, Bitcoin's net realized profit/loss has flipped negative on a seven-day average, indicating that holders are locking in losses—a pattern characteristic of market capitulation phases. The breakdown of selling activity points to broad-based selling across different investor cohorts.
Analysts warn that this high-risk phase could persist for several more months before a potential trend reversal. Research firm 10x Research echoed this cautious tone in a separate note, stating that while some technical gauges appear stretched, the larger downtrend remains intact without a clear catalyst for a sustained recovery.
