Bitcoin’s Sharpe ratio has fallen to around -10, a level last seen near major bear market bottoms in 2018 and 2022, signalling an increasingly extreme risk-reward profile.
CryptoQuant analyst Darkfost said the metric has entered a zone historically linked to the final phases of bear markets, though it does not yet confirm that a bottom is in place.
“The Sharpe ratio has just entered a particularly interesting zone, one that has historically aligned with the final phases of bear markets,”
The analyst said in a post on X.
The ratio, which measures returns relative to risk, last reached similar negative levels in late 2018 and late 2022, periods that coincided with deep market capitulation.
Darkfost warned that bitcoin’s performance remains unattractive compared with the risk being taken, as the ratio continues to deteriorate.
However, the analyst noted that such negative readings often emerge near market turning points, even if price weakness persists for months before a true reversal.
Bitcoin recently rebounded from around $60,000 to near $71,000 but remains well below its October peak, with analysts cautioning that the broader downtrend is still intact.
At the time of reporting, Bitcoin price was $68,694.34.