The Bitcoin Sharpe ratio, which measures threat/reward potential, is in adverse territory that’s usually related to the tip of bear markets, in keeping with CryptoQuant analyst Darkfost.
“The Sharpe ratio has simply entered a very attention-grabbing zone, one which has traditionally aligned with the ultimate phases of bear markets,” said the analyst on X on Saturday.
They added, nevertheless, that it isn’t a sign that the bear market is over, “however slightly that we’re approaching a degree the place the risk-to-reward profile is changing into excessive.”
The Sharpe ratio has fallen to -10, its lowest stage since March 2023, accordingly to CryptoQuant.
The ratio measures Bitcoin (BTC) efficiency relative to the danger taken, indicating how a lot return an investor can count on for every unit of threat.
Unfavorable ratio alerts market turning level
The ratio was decrease in late 2022 to early 2023, and late 2018 to early 2019 — each intervals marking the depths of the bear market cycle. The metric fell to zero in November 2025 when BTC costs hit an area low of $82,000.
The analyst stated that in sensible phrases, “the danger related to investing in BTC stays excessive relative to the returns just lately noticed.”
“The ratio continues to be deteriorating, exhibiting that BTC’s efficiency just isn’t but engaging in comparison with the danger being taken,” they added.
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Nevertheless, a adverse Sharpe ratio often alerts market turning factors, they stated.
“However one of these dynamic is exactly what tends to look close to market turning zones. We’re regularly approaching an space the place this pattern has traditionally reversed.”
True reversal may very well be months away
The analyst cautioned that this section “might final a number of extra months, and BTC might proceed correcting earlier than a real reversal takes place.”
Analysts at 10x Analysis additionally expressed warning in a market replace on Monday, status:
“Whereas sentiment and technical indicators are approaching excessive ranges, the broader downtrend stays intact. Within the absence of a transparent catalyst, there’s little urgency to step in.”
BTC tanked to $60,000 on Friday however recovered to $71,000 by Monday. Nevertheless, it stays down 44% from its October peak of $126,000, and sentiment stays firmly in bear market territory, analysts say.
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