Analysis: Bitcoin's returns do not match its risks, similar to the situation in 2022

PANews January 23 News, according to CoinDesk, CryptoQuant data shows that Bitcoin’s Sharpe ratio has dipped into negative territory, reaching levels seen during market crashes in 2018-2019 and 2022, indicating poor risk-adjusted performance. The current high volatility is not matching weak returns. This indicator measures the ratio of excess return over the risk-free rate to volatility. Turning negative means that the returns from holding Bitcoin are no longer sufficient to compensate for its sharp price fluctuations. Although Bitcoin’s price has fallen from the October 2025 peak of over $120,000 to around $90,000, market volatility remains high.

Historical data suggests that a negative Sharpe ratio can persist for several months after prices stop declining sharply, such as during the long bear markets at the end of 2018 and in 2022. Analysts note that this ratio is not an exact bottom indicator but shows that risk and return have reset to levels seen before major market rallies. The market is usually focused on whether this ratio can sustain a rebound into positive territory, which typically indicates returns surpassing volatility and aligns with the start of a new bull market. Currently, there are no signs of such a trend reversal.