Analysis: Bitcoin's returns are mismatched with its risks, similar to the situation in 2022.

PANews reported on January 23 that, according to CoinDesk, CryptoQuant data shows that Bitcoin's Sharpe ratio has fallen deep into negative territory, reaching levels seen during the 2018-2019 and 2022 market crashes. This indicates poor risk-adjusted performance, with current high volatility mismatched with weak returns. This metric measures the ratio of excess returns relative to the risk-free rate to volatility. Its negative value means that the returns from holding Bitcoin are no longer sufficient to compensate for the risk of its volatile price movements. Although Bitcoin's price has fallen from its all-time high of over $120,000 in October 2025 to around $90,000, market volatility remains high.

Historical data shows that a negative Sharpe ratio can persist for months even after prices have stopped falling sharply, as seen in the prolonged bear markets of late 2018 and 2022. Analysts point out that while the ratio isn't a precise bottom signal, it indicates that the risk-reward ratio has reset to levels previously seen before major market rallies. The market typically focuses on whether the ratio can sustain a return to positive territory, which usually signifies that returns are starting to outpace volatility, coinciding more closely with the start of a new bull market. Currently, there are no signs of such a reversal.