BITCOIN SHARPE RATIO IS SIGNALING A CYCLE BOTTOM?
The Sharpe Ratio of Bitcoin has just reached 38, which is a low-risk area in history.
The Sharpe Ratio is calculated using the formula:
SharpeRatio=(Rp−Rf)/σpSharpe Ratio
Where:
RpR_pRp = return of the asset
RfR_fRf = risk-free return
σp\sigma_pσp = volatility
When this index falls to extremely low levels, it means that risk-adjusted returns are being heavily compressed, the market is almost no longer valuing risk highly, as most investors have become disheartened or left the game.
History shows that each time it falls into this zone, it coincides with major cycle bottoms: 2015, 2019, 2022
The common thread of those periods is not euphoria but extreme pessimism.
The Sharpe Ratio of Bitcoin has just reached 38, which is a low-risk area in history.
The Sharpe Ratio is calculated using the formula:
SharpeRatio=(Rp−Rf)/σpSharpe Ratio
Where:
RpR_pRp = return of the asset
RfR_fRf = risk-free return
σp\sigma_pσp = volatility
When this index falls to extremely low levels, it means that risk-adjusted returns are being heavily compressed, the market is almost no longer valuing risk highly, as most investors have become disheartened or left the game.
History shows that each time it falls into this zone, it coincides with major cycle bottoms: 2015, 2019, 2022
The common thread of those periods is not euphoria but extreme pessimism.