Crypto analyst Ali Martinez said the sharp decline in Bitcoin’s Sharpe ratio, a risk-reward indicator, could signal a favorable period for long-term buying in the spot market.
According to data shared by Martinez, Bitcoin’s Sharpe ratio has fallen to minus 23. The Sharpe ratio, which measures the return of an investment relative to the risk or volatility taken, indicates strong returns relative to risk when it is positive, while negative values indicate periods when investors suffer significant losses.
The analyst noted that a result of -23 does not necessarily mean that Bitcoin’s decline will continue indefinitely; Rather, it suggests that sellers may have largely exhausted their options. According to Martinez, this creates an asymmetric entry opportunity for long-term Bitcoin investors, where the risk is more limited than the potential gain.
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Martinez said past data also revealed a similar situation, recalling that the Sharpe ratio fell to similar levels during the bear market troughs of 2015, 2019 and 2022. He pointed out that these periods coincided with the final capitulation and with phases of intense selling in the market.
On the other hand, according to on-chain data, Bitcoin has formed a strong support zone between $63,111 and $61,840. URPD data shows that more than 1.3 million $BTC changed hands in this price range.
Martinez noted that as long as this support zone holds, Bitcoin will not face a significant supply wall of up to $84,569. Around 582,000 $BTC have already negotiated at this level. Therefore, the analyst added, maintaining the region between $61,840 and $63,111 is critical for Bitcoin’s medium-term outlook.
*This does not constitute investment advice.
