Bitcoin’s Sharpe ratio — a metric used to assess risk-adjusted returns — has slipped into negative territory, a level historically associated with the late stages of bear markets, according to CryptoQuant analyst Darkfost.
“The Sharpe ratio has just entered a particularly interesting zone, one that has historically aligned with the final phases of bear markets,” the analyst wrote on X on Saturday.
Darkfost cautioned that this does not signal the end of the current bear market, but suggests that Bitcoin is nearing a point where the risk-to-reward profile becomes increasingly extreme.
Data from CryptoQuant shows the Sharpe ratio has fallen to –10, its lowest reading since March 2023.
The metric compares Bitcoin’s returns against the level of risk taken, offering insight into how much reward investors receive for each unit of risk.
Negative ratio points to potential market turning point
Historically, the Sharpe ratio has dipped to similar levels during major market bottoms, including late 2022 to early 2023 and late 2018 to early 2019 — periods that marked the depths of previous bear market cycles.
The metric last fell to zero in November 2025, when Bitcoin prices reached a local low near $82,000.
In practical terms, the analyst noted that the risk of investing in Bitcoin currently remains elevated relative to the returns seen in recent months.
“The ratio is still deteriorating, indicating that Bitcoin’s performance is not yet attractive compared with the level of risk being taken,” the analyst said.
Despite this, negative Sharpe ratio readings have historically preceded market turning points, suggesting a potential shift may be approaching.
“But this type of dynamic is precisely what tends to appear near market turning zones. We are gradually approaching an area where this trend has historically reversed.”
True reversal may still be months away
The analyst warned that this phase could persist for several more months, with Bitcoin potentially continuing to correct before a meaningful trend reversal occurs.
Analysts at 10x Research echoed a cautious outlook in a market update on Monday, noting that:
“While sentiment and technical indicators are approaching extreme levels, the broader downtrend remains intact. In the absence of a clear catalyst, there is little urgency to step in.”
Bitcoin fell to $60,000 on Friday before rebounding to around $71,000 by Monday. Despite the recovery, the asset remains down roughly 44% from its October high of $126,000, with market sentiment still firmly in bear-market territory, according to analysts.
