On-Chain Data Platform CryptoQuant Analyst Darkfost pointed out that the Bitcoin Sharpe Ratio, which measures the risk-reward relationship, has fallen into negative territory and is approaching levels that have historically appeared during the late stages of multiple bear markets. This change is seen as a potential cycle signal but does not necessarily mean a market reversal.
Darkfost stated on X that the current indicator range has often corresponded to the final downward phase of the market in the past. However, this more resembles a sign that the “risk-reward ratio has reached an extreme,” rather than an immediate confirmation of a bull market. Data shows that the indicator has dropped to -10, the lowest since March 2023.
The Sharpe Ratio mainly reflects an asset’s return ability per unit of risk. When this value is negative, it indicates that investors are taking on more risk than the returns they are receiving. Historically, during late 2018 to early 2019 and late 2022 to early 2023, this indicator was also in a low range, followed by a gradual market bottoming process.
However, analysts also caution that the current environment is not exactly the same as in the past. Although Bitcoin’s price once dropped to about $82,000 in November 2025, bringing this indicator close to zero, the risk side is still rising, and returns have not improved, indicating that the market structure remains weak.
The research team at 10x Research also maintains a cautious stance, believing that without clear macro or industry catalysts, a trend reversal is unlikely in the short term. While technical indicators are approaching extreme levels, the downward channel has not yet been broken.
In terms of price performance, Bitcoin briefly fell back to around $60,000 last Monday, rebounded to about $71,000 early this week, but still retraced approximately 44% from the peak of $126,000 set in October 2025. Sentiment remains under significant pressure.
Based on historical experience, a negative Sharpe Ratio often signals a brewing phase of a phase change, but the actual recovery process may take several months. For market participants, this is more like a patience-testing period of risk and opportunity coexistence rather than an immediate “buy the dip” signal.
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