The latest indications suggest that Bitcoin may be nearing its bottom, as its risk-adjusted returns have decreased to levels historically associated with bear market bottoms over the last decade.
On June 11, the Sharpe ratio, which evaluates returns relative to volatility, dropped to -20, as reported by CryptoQuant and analyzed by CoinDesk. This threshold was previously reached during the lows of the 2015, 2018-19, and 2022-23 cycles.
However, it's crucial to note what followed in those instances. Each time the Sharpe ratio hit -20, it marked the beginning of a lengthy consolidation phase rather than an immediate price surge. In 2015, the metric remained below this level for approximately five months, while in 2018-19 and 2022-23, it stayed under for about three months each before Bitcoin initiated a sustained recovery. Thus, this signal suggests that a bottom may be forming rather than indicating an imminent rebound.
During the first half of June, wallets known as Accumulator addresses, which typically hold assets instead of selling them, accumulated roughly 125,000 BTC.
Additionally, exchange reserves have decreased by around 80,000 BTC since February, bringing the total to about 2.71 million. In the past day alone, whales have withdrawn more than 11,000 BTC from exchanges.
This development is part of a series of on-chain indicators signaling potential bottoms over the last two weeks, following similar insights from valuation and sentiment metrics. These measures focus on accumulation and market exhaustion rather than trading flows. The recent rise from Bitcoin's low of $59,130 to around $65,800 was primarily driven by the US-Iran deal, not these metrics, according to CoinDesk data.
The forthcoming FOMC decision, which marks Kevin Warsh's first as chair, will be a significant factor to watch. With a hold almost entirely priced in, the outcomes of the dot plot and Warsh's comments on inflation will determine whether this recovery continues.