BTC Market Update

• BTC has recovered by 2.21% over the past 24 hours.
• As market volatility persists, Bitcoin’s Sharpe ratio continues to decline.

Over the past 48 hours, Bitcoin (BTC) has made a significant recovery, rising from a low of $76k to $84k. Despite these gains, Bitcoin’s risk-adjusted returns continued to deteriorate, as per AMBCrypto’s analysis.

Over the past year, Bitcoin’s Sharpe ratio has shown significant signs of weakness, suggesting a rising risk per unit of returns. This indicates less efficient gains and greater market instability.

Although BTC saw significant gains over the past months, price fluctuations have intensified, reducing the efficiency of returns relative to the risk taken.

This decline may arise from macroeconomic uncertainty, where external factors such as monetary policies and global liquidity shifts have increased perceived risk.

Despite the recent price surge, gains are becoming more volatile and uncertain—this serves as a warning sign for potential market instability or price corrections.

Such perceived market instability has led investors to adopt a bearish stance, prompting them to sell to avoid potential losses.

This behavior has become widespread among both short-term and long-term holders; the long-term holders’ net position change has remained negative for an extended period.

Consequently, during market instability, long-term holders have capitulated as some fear ongoing uncertainty.

These prevailing market conditions have increased pressure on the ratio as Bitcoin faces mounting sell-side pressure.

Historically, extreme volatility has resulted in lower profitability for both short-term and long-term holders.

However, the recent drop in the MVRV Ratio offers some hope. Bitcoin’s MVRV below 2 signals a market bottom, where buyers may start re-entering the market, leading to a potential rebound.

Lower profitability reduces the likelihood of selling.

Impact on BTC?

Bitcoin’s Sharpe ratio has been in decline since March 2024. Even during cycles where BTC reached multiple new all-time highs, the ratio experienced significant pressure.

If macroeconomic factors stabilize, potentially reducing volatility, we could see BTC prices recover and possibly reclaim $86k. However, if fluctuations continue, Bitcoin may drop to $81,557.