Bitcoin's Signal, Seen Only Three Times in 2019, 2021, and 2022, Has Failed Again! What Does It Mean for BTC Price?
Bitcoin (BTC) has begun to recover this week after experiencing sharp declines. As the price of BTC climbs to $89,000, the only question on everyone’s mind is, will the rise continue?
While analysts follow many technical indicators in predicting Bitcoin’s price, CryptoQuant senior analyst Julio Moreno and analytics firm Alphractal examined the “Bitcoin Sharpe Ratio.”
According to Moreno’s analysis, Bitcoin’s Sharpe Ratio has fallen to near zero. Historically, this threshold signals a period of market uncertainty and a repricing of risk, he said.
According to Moreno, this technical indicator suggests that BTC has formed a market bottom.
The analyst noted that the same levels were seen in 2019, 2020, and 2022, signaling that a stabilization phase is imminent in the market. Historically, a decline in the Sharpe Ratio has often triggered an influx of smart money, laying the groundwork for a long-term uptrend.
Apart from this, analysis company Alphractal also examined the Bitcoin Sharpe Ratio and reminded that it can be a bullish signal as well as a bearish signal.
The analysis firm said that a similar situation was seen in 2019, 2021 and 2022, all of which historically experienced more challenging periods in the short and medium term.
He also noted that when the Annual Sharpe Ratio experiences such a sharp decline, BTC usually enters prolonged sideways phases, experiences additional corrections, and takes longer for the uptrend to resume.
Finally, Alphractal acknowledged that there is a bullish side to the story, saying, “Great bull cycles have always occurred after these rate resets; that is, when risk is repricing and the market is realigning itself. In the short term, the signal is bearish.”
*This is not investment advice.