Bitcoin’s Risk-Adjusted Returns Decline Amid Market Volatility
Bitcoin's risk-adjusted returns have weakened significantly in February, as noted by research service Ecoinometrics. Key points include:
- Over the past year, Bitcoin’s total returns align with gold, a traditional safe-haven asset.
- When adjusted for risk, Bitcoin resembles a major stock index instead of a safe-haven asset.
- Risk-adjusted returns measure profitability relative to price volatility; higher ratios indicate stronger returns with lower volatility.
- Bitcoin is modestly lower in 2025 amid geopolitical tensions and market instability, while gold has risen over 11% year-to-date.
- Analyst James Van Straten observed that Bitcoin and gold are currently uncorrelated, which usually indicates a bottom for Bitcoin.
- This trend may affect Bitcoin's appeal to institutional investors focused on favorable risk-reward profiles.
Despite its long-term narrative as "digital gold," Bitcoin's short-term performance suggests it is acting more like equities.