Bitcoin's risk-adjusted returns worsen, echoing 2022 bear market

Bitcoin's risk-adjusted returns have deteriorated again, showing signals similar to the 2022 bear market, Coindesk reported, citing data from CryptoQuant. The analysis points to Bitcoin's Sharpe Ratio, a measure of excess return for a given level of risk, which has recently turned negative. This indicates that the cryptocurrency is generating almost no excess returns relative to its risk. This pattern has been observed in the past. During the bear markets of late 2018 and 2022, the Sharpe Ratio remained in negative territory for extended periods, coinciding with a prolonged bearish trend for BTC. While some traders might interpret a negative Sharpe Ratio as a bottom signal, the report cautions that historical precedent shows the condition can persist for several months, making it an unreliable indicator of a short-term rebound.