Bitcoin Sharpe Ratio Currently Falling Faster Than Price — What’s Happening?
Bitcoin's price has dropped to around $81,000, reinforcing bearish sentiment amid factors like geopolitical tensions and liquidation cascades. According to Joao Wedson, founder of Alphractal, the Bitcoin Sharpe Ratio—a measure of risk-adjusted returns—is declining faster than the price itself, indicating the market is taking on more risk for diminishing returns. This ratio turned negative earlier in the year, yet BTC's price continued to rally briefly before the current downturn. Historically, such a rapid decline in the Sharpe Ratio often leads to extended periods of sideways or negative momentum. Wedson warns that if Bitcoin loses the $81,000 support, a deeper capitulation similar to 2022 could occur, potentially driving the price down to $65,500. As of now, BTC has slightly recovered to above $83,000 but remains down nearly 8% over the past week.
bitcoinist01/31 15:31