Bitcoin's Sharpe Ratio slides to lowest since 2022
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Bitcoin BTC $ 62,867.66 has dropped by 28% so far this year, a brutal slide that looks even worse through the lens of the Sharpe Ratio, a metric professional investors use to determine what slice of their portfolio should be allocated to a specific asset.
Key facts
Bitcoin's 365-day rolling Sharpe Ratio plummeted to -21 at the end of June, the lowest since late 2022, according to data source CryptoQuant
Similar readings coincided at or around bear market bottoms in 2015, 2019 and 2022, presaged bullish trend reversals and major price gains
In this case, A’s smoother price path might give it a Sharpe Ratio of, say, 1.5, while Coin B’s wild swings leave it with a Sharpe Ratio of 0.5
Bitcoin BTC $ 62,867.66 has dropped by 28% so far this year, a brutal slide that looks even worse through the lens of the Sharpe Ratio, a metric professional investors use to determine what slice
Summary
Bitcoin has fallen 28% this year, and its 365-day Sharpe Ratio has plunged to nearly minus 20, signaling extremely poor risk-adjusted returns. A Sharpe Ratio that negative means investors would have been better off in risk-free assets like 10-year U.S. Treasuries, which currently yield about 4.45%. Similarly depressed Sharpe Ratio readings in 2015, 2019 and 2022 aligned with bear-market bottoms. The Sharpe Ratio is the gold standard for measuring risk-adjusted returns and was developed by Nobel Prize-winning economist William F.