The post Reliable Indicator Shows Bitcoin Still in High-Risk Territory, with Historic 87% Drops appeared on BitcoinEthereumNews.com.

A reliable market indicator shows Bitcoin remains in high-risk territory, with historic data suggesting the cryptocurrency may be due for a sharp correction. The sentiment in the crypto market has been bullish for consecutive days. As Bitcoin maintains stability above the $63K price level, market participants are pondering BTC’s next direction. In a post on X today, prominent on-chain analyst Ali Martinez called attention to the recent observation that Bitcoin’s Sharpe Ratio remains in “high-risk” territory. He shared a chart highlighting the correlation between Bitcoin’s price and its Sharpe Ratio over the last ten years. Notably, Bitcoin’s Sharpe Ratio measures risk-adjusted returns, assessing its performance relative to its volatility. Its entry into high-risk territory signals that the cryptocurrency may be at a local top. Historical Observation of Bitcoin’s Sharpe Ratio with 87% Price Crash  Historically, when Bitcoin’s Sharpe Ratio enters the red high-risk zone, as it did in 2014, 2017, and late 2021, BTC has often been close to its peak. Following these high-risk zones, Bitcoin experienced sharp corrections, with prices pulling back significantly. For instance, in December 2013, when Bitcoin set an all-time high above $1,150, the ratio hit the high-risk zone. A few months later, Bitcoin tanked to as low as $150, representing approximately an 87% price collapse. However, after hitting $150 in early 2015, the ratio reached a low-risk point, from which Bitcoin later rallied to a fresh all-time high. Specifically, by December 2017, Bitcoin hit a new peak of $20,089, and once again, the Sharpe Ratio entered the red zone. This was followed by another massive drop, with Bitcoin’s price falling 85% in December 2018 to below $3,200. At that point, Bitcoin’s Sharpe Ratio also plunged to low-risk, providing a favorable buy signal for investors. As expected, the premier crypto advanced substantially afterward to a fresh…

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Filed under: News - @ September 25, 2024 5:25 pm