- Bitcoin’s Sharpe ratio was higher than gold and other major stock and commodity markets
- Bitcoin’s realized volatility in the first week of April was the highest since late 2022
The world’s largest cryptocurrency Bitcoin [BTC] outperformed the market’s mainstream financial instruments in terms of risk-adjusted returns, while still retaining their typical ‘high volatility’ characteristics.
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According to crypto market data provider Kaiko, Bitcoin’s Sharpe ratio was higher than gold and other major stock and commodity markets in early April.
Source: Kaiko
The Sharpe ratio is a commonly used metric in the financial world and measures the risk-adjusted return on a financial instrument. Simply put: it compares the performance of the asset in relation to its volatility – both up and down.
Typically, a Sharpe ratio of one or higher is considered a good risk-adjusted return. In the above-mentioned chart, Bitcoin’s Sharpe ratio is around four.
High volatility, but higher returns
Here it is worth noting that Bitcoin’s realized volatility in the first week of April was the highest since the end of 2022. Moreover, it significantly exceeded the volatility of assets such as gold. This suggested that despite wild price swings, Bitcoin emerged as an attractive investment option.
Source: Kaiko
Bitcoin is up 60% since the start of 2024, and more than four times the 2022 bear market lows. At the time of writing, it was trading around its own price high levels of $67k, with multiple analyzes predicting a strong bullish rise in the coming months.
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Higher risk-adjusted returns bode well for the future adoption of the world’s largest cryptocurrency. In fact, suspicions of this are already noticeable.
Finally, according to AMBCrypto’s analysis of Glassnode’s data, Bitcoin wallets with non-zero balances have grown sharply in recent years, implying confidence in the asset’s long-term potential.
Source: Glassnode