Reliable Indicators Show Bitcoin Remains in HighRisk Zone Historically Down 87

CoinWorld reports:
A reliable market indicator shows that Bitcoin remains in a high-risk zone, with historical data suggesting that this cryptocurrency may undergo significant corrections.
The sentiment in the cryptocurrency market has been bullish for several days. As Bitcoin stabilizes around the price level of $63,000, market participants are contemplating its next direction.
In a post today on X, renowned on-chain analyst Ali Martinez drew attention to recent observations indicating that Bitcoin’s Sharpe ratio remains in the “high-risk” zone. He shared a chart highlighting the correlation between Bitcoin’s price and its Sharpe ratio over the past decade.
It is noteworthy that Bitcoin’s Sharpe ratio measures risk-adjusted returns, assessing its performance relative to volatility. Entering the high-risk territory suggests that the cryptocurrency may be nearing its local peak.
Historical observations of Bitcoin’s Sharpe ratio indicate price declines of up to 87%; historically, when Bitcoin’s Sharpe ratio enters the red high-risk zone—as seen at the end of 2014, 2017, and 2021—Bitcoin tends to be close to its peak. Following these high-risk zones, Bitcoin typically experiences substantial corrections, with prices significantly retreating.
For instance, in December 2013, when Bitcoin surpassed $1,150, the ratio reached the high-risk zone. A few months later, Bitcoin plummeted to $150, reflecting a drop of about 87%.
However, after reaching $150 in early 2015, the ratio hit a low-risk point, and Bitcoin subsequently rebounded to a historical high.
Specifically, by December 2017, Bitcoin reached a new high of $20,089, with the Sharpe ratio again entering the red zone. Following that, Bitcoin’s price dropped significantly, with an 85% decline to below $3,200 by December 2018.
At that time, Bitcoin’s Sharpe ratio also fell into low-risk territory, providing a favorable buying signal for investors. As expected, by November 2021, the leading cryptocurrency surged to a new high of approximately $69,000.
By November 2022, Bitcoin’s price plummeted to $15,599, triggering a low-risk signal in the Sharpe ratio.



Current Cycle: Bitcoin Remains in Red Zone
Now, in the ongoing bull market cycle, Bitcoin’s Sharpe ratio reached a high-risk level in March when Bitcoin set its historical peak of $73,750.
CryptoQuant analyst Joao Wedson first called attention to this development on March 23, warning investors to “act wisely.”
In fact, since Bitcoin hit the $73,000 peak, the cryptocurrency market has not been optimistic. Instead, Bitcoin’s price has repeatedly declined, with the most notable drop occurring in August when Bitcoin fell to $49,121.
Since then, the major asset rebounded over 32% to $64,996. However, Bitcoin’s Sharpe ratio did not emit a low-risk signal. This situation suggests that the cryptocurrency market may already be in a bear market, a fact that many may not recognize.
It is worth noting that some market analysts have issued warnings that reliable cyclical indicators have been flashing bear market signals since Bitcoin dropped to $49,000 last month. However, the sustained recovery above $64,000 has fueled optimism in the market.