Jan 3, 2026
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Bitcoin Sharpe Ratio Turns Negative Amidst Price Recovery Efforts
The price of Bitcoin is showing signs of a potential bullish phase after a stable end to 2025. Despite this, on-chain evaluations suggest a discrepancy between price action and market dynamics.
Key Points
- Alphractal CEO Joao Wedson discussed the implications of Bitcoin's negative Sharpe Ratio, which measures return efficiency against risk.
- A reading above 1 indicates a healthy market, while below 0 suggests high-risk, low-return conditions.
- The current Sharpe Ratio for Bitcoin has fallen below zero, signaling inefficiency in risk-reward balance.
- Historically, negative Sharpe Ratios correlate with consolidation or transitional phases, not necessarily market bottoms.
- Wedson advises cautious optimism, as the low ratio doesn't confirm a market bottom.
2026 Outlook
- Bitcoin closed 2025 with minimal movement, raising concerns about its performance in 2026.
- Lack of demand growth suggests a potential bear market, with a possible bottom in late 2026.
- Current price stands at approximately $89,886, marking a 1.4% increase over the past day.
