The Bitcoin Sharpe ratio, which measures risk-reward potential, is in negative territory, which is commonly related to the tip of bear markets, in accordance with CryptoQuant analyst Darkfost.
“The Sharpe ratio has just entered a very interesting zone that historically coincides with the ultimate stages of bear markets,” the analyst said on X on Saturday.
However, they added that this shouldn’t be a signal that the bear market is over, “but somewhat that we’re approaching a degree where the risk-reward profile becomes extreme.”
According to CryptoQuant, the Sharpe ratio has fallen to -10, its lowest level since March 2023.
The ratio measures the performance of Bitcoin (BTC) relative to the danger taken and indicates how much return an investor can expect for every unit of risk.
The Bitcoin Sharpe Ratio is at bear market lows. Source: Darkfost
A negative ratio signals a market turning point
The ratio was lower in late 2022 to early 2023 and late 2018 to early 2019 – each periods marked the depths of the bear market cycle. The indicator fell to zero in November 2025 when BTC prices hit a neighborhood low of $82,000.
The analyst said that in practical terms, “the danger related to investing in BTC stays high in comparison with recently observed returns.”
“The ratio continues to be deteriorating, showing that BTC’s performance shouldn’t be yet attractive relative to the danger taken,” they added.
However, a negative Sharpe ratio normally signals market turning points, they said.
“But this exact sort of dynamic tends to occur near market turning zones. We are beginning to approach an area where this trend has reversed prior to now.”
An actual turnaround could still be months away
The analyst warned that this phase “could potentially last for several more months and BTC could proceed the correction before an actual trend reversal occurs.”
Analysts at 10x Research also expressed caution in a market update on Monday, stating:
“While sentiment and technical indicators are approaching extreme levels, the general downtrend stays intact. With no clear catalyst, there’s little urgency to intervene.”
BTC fell to $60,000 on Friday but recovered to $71,000 by Monday. However, it continues to be 44% below its October peak of $126,000 and sentiment stays firmly in bear market territory, analysts say.
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