According to TechFlow, on July 06, CryptoQuant analyst Darkfost pointed out that data shows Bitcoin's Sharpe Ratio has again fallen into an extremely negative range, once dropping below -20. Although it subsequently recovered slightly, historically, this level usually corresponds to extreme pessimism in the market towards Bitcoin.
The Sharpe Ratio is mainly used to measure the performance of investment risk relative to current returns. When this indicator turns negative, it means the risk currently undertaken is high relative to returns. This situation aligns with Bitcoin closing lower for 3 consecutive quarters, with a decline of 16.1% in the most recent quarter.
Historically, such extreme pessimism phases often last for weeks or months and often correspond to the process of Bitcoin building a new bottom. However, relevant judgments are based on longer-cycle data, and short-term trends still require cautious observation.
