Bitcoin Sharpe ratio slides to levels seen in previous market bottoms

The Bitcoin Sharpe ratio, which measures risk/reward potential, is successful antagonistic territory that is often associated with the extremity of carnivore markets, according to CryptoQuant expert Darkfost.

“The Sharpe ratio has conscionable entered a peculiarly absorbing zone, 1 that has historically aligned with the last phases of carnivore markets,” said the expert connected X connected Saturday.

They added, however, that it is not a awesome that the carnivore marketplace is over, “but alternatively that we are approaching a constituent wherever the risk-to-reward illustration is becoming extreme.”

The Sharpe ratio has fallen to -10, its lowest level since March 2023, according to CryptoQuant.

The ratio measures Bitcoin (BTC) show comparative to the hazard taken, indicating however overmuch instrumentality an capitalist tin expect for each portion of risk. 

Bitcoin Sharpe ratio is astatine carnivore marketplace lows. Source: Darkfost

Negative ratio signals marketplace turning point

The ratio was little successful precocious 2022 to aboriginal 2023, and precocious 2018 to aboriginal 2019 — some periods marking the depths of the carnivore marketplace cycle. The metric fell to zero successful November 2025 erstwhile BTC prices deed a section debased of $82,000. 

The expert said that successful applicable terms, “the hazard associated with investing successful BTC remains precocious comparative to the returns precocious observed.”

“The ratio is inactive deteriorating, showing that BTC’s show is not yet charismatic compared to the hazard being taken,” they added.  

Related: Bitcoin carnivore marketplace not over? Trader sees BTC terms 'real bottom' astatine $50K

However, a antagonistic Sharpe ratio usually signals marketplace turning points, they said. 

“But this benignant of dynamic is precisely what tends to look adjacent marketplace turning zones. We are gradually approaching an country wherever this inclination has historically reversed.”

True reversal could beryllium months away

The expert cautioned that this signifier “may past respective much months, and BTC could proceed correcting earlier a existent reversal takes place.” 

Analysts astatine 10x Research besides expressed caution successful a marketplace update connected Monday, stating: 

“While sentiment and method indicators are approaching utmost levels, the broader downtrend remains intact. In the lack of a wide catalyst, determination is small urgency to measurement in.” 

BTC tanked to $60,000 connected Friday but recovered to $71,000 by Monday. However, it remains down 44% from its October highest of $126,000, and sentiment remains firmly successful bear marketplace territory, analysts say.

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