MarketsBitcoin's Sharpe Ratio Hits Lowest Point Since 2022
A negative reading indicates that investors would have fared better with risk-free assets such as 10-year U.S. Treasuries.
By Omkar Godbole|Edited by Sheldon Reback Jul 6, 2026, 10:19 a.m. 2 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on
Professional investors consider both risk-adjusted returns and price performance. (Rodrigo Rodrigues/Unsplash)Show- Bitcoin has declined by 28% this year, with its 365-day Sharpe Ratio falling to almost -20, indicating extremely poor risk-adjusted returns.
- A negative Sharpe Ratio suggests that investors would have been better off in risk-free assets like the 10-year U.S. Treasury, yielding around 4.45%.
- Similar low Sharpe Ratio values in 2015, 2019, and 2022 coincided with bear market bottoms.
Bitcoin BTC$62,746.81 has experienced a 28% decline so far this year, a significant downturn that is highlighted by its Sharpe Ratio, a crucial metric for professional investors assessing portfolio allocations.
The Sharpe Ratio, developed by Nobel laureate William F. Sharpe, is regarded as the standard for evaluating risk-adjusted returns.
As of the end of June, Bitcoin's 365-day rolling Sharpe Ratio dropped to -21, the lowest level since late 2022, according to data from CryptoQuant. It has recently been close to -20.
This starkly negative figure reveals that Bitcoin investors endured significant market volatility while achieving returns that were inferior to those of a risk-free investment, such as the 10-year U.S. Treasury note, which recently had a yield around 4.45%.
BTC's Sharpe Ratio has fallen to nearly -20. (CryptoQuant, Joao Wedson)The Sharpe Ratio is derived by subtracting the risk-free rate from the asset's total return over a designated period, subsequently dividing that result by the asset's standard deviation, which measures price volatility. A positive ratio indicates that investors are rewarded for taking on volatility risk, while a negative ratio signifies they are penalized.
Professional investors do not solely assess a cryptocurrency's price in relation to its long-term average to identify potential bargains. They also utilize metrics like the Sharpe Ratio for determining position sizes.
Consider two coins: Coin A has decreased by 30% from its peak, but its decline has been steady. Coin B has also dropped 30%, but its price has fluctuated wildly, experiencing significant daily swings. While both coins appear equally “cheap” based on the percentage drop, a professional investor would seek to understand the risk-adjusted return.
In this scenario, Coin A’s stable price movements might yield a Sharpe Ratio of 1.5, while Coin B’s erratic fluctuations could result in a Sharpe Ratio of only 0.5. Thus, despite both coins having the same 30% decline, Coin A clearly offers better performance per unit of risk, making it a more appealing option for position sizing.
Contextual Background
A Sharpe Ratio of -20 signifies a year marked by poor volatility-adjusted performance, but it may also signify a rare bottoming signal for Bitcoin's price.
Historically, every instance where the yearly risk-adjusted return has reached such "unattractive" levels has indicated a point of maximum seller exhaustion.
Similar Sharpe Ratio readings were observed at or near bear market bottoms in 2015, 2019, and 2022, which preceded bullish trend reversals and significant price increases.
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