Bitcoin (BTC $88,726.94) may no longer offer rewards worth the risk, according to its latest Sharpe Ratio — a key metric used by fund managers to measure whether an asset’s returns justify its volatility.
The ratio has turned negative for Bitcoin, according to CryptoQuant data, signaling that recent gains are not compensating investors for wild price swings. Elevated intraday volatility and uneven rebounds have compressed risk-adjusted returns, even as BTC trades far below its early October highs above $120,000.
Historically, the Sharpe Ratio has turned negative during the depths of bear markets, including in late 2018 and 2022, often persisting for months even after sharp declines ease. This has led some social media commentators to speculate that the latest negative reading could signal the end of BTC’s downtrend and the start of a new bull run.
However, analysts caution that a negative Sharpe Ratio does not predict price direction. “The Sharpe Ratio doesn’t call bottoms with precision. It shows when risk-reward has reset to levels that historically precede major moves,” wrote a CryptoQuant analyst. “We’re oversold—lower risk for long-term positioning—not because prices can’t go lower, but because the risk-adjusted setup favors it.”
Traders generally focus on the metric’s recovery toward positive territory, which historically indicates improving risk-reward dynamics and the potential for renewed upward momentum. As of now, Bitcoin remains near $90,000 amid volatile swings and underperformance relative to gold, bonds, and global tech stocks, offering little sign of an imminent bullish turnaround.
