What is the Sharpe ratio of Bitcoin?
The current Bitcoin Sharpe ratio is 3.31. A Sharpe ratio of 3.0 or higher is considered excellent.
The current Crypto Portfolio Sharpe ratio is 2.67. A Sharpe ratio higher than 2.0 is considered very good. The Sharpe ratio of Crypto Portfolio lies between the 25th and 75th percentiles.
Bitcoin's Sharpe Ratio of +0.97 over five years highlights its competitive risk-adjusted returns amid market volatility.
This tells us that with a Sharpe ratio of 2, Portfolio B provides a superior return on a risk-adjusted basis. Generally speaking, a Sharpe ratio between 1 and 2 is considered good. A ratio between 2 and 3 is very good, and any result higher than 3 is excellent.
Bitcoin has current Sortino Ratio of 0.208.
ETH-USD - Sharpe Ratio Comparison. The current SOL-USD Sharpe Ratio is 9.34, which is higher than the ETH-USD Sharpe Ratio of 2.11. The chart below compares the 12-month rolling Sharpe Ratio of SOL-USD and ETH-USD.
A Sharpe ratio of 1.5 indicates that the investment is generating 1.5 units of excess return for each unit of risk taken, relative to the risk-free rate. It implies better risk-adjusted performance than a lower Sharpe ratio.
Key Points
A $1,000 investment in Bitcoin five years ago would be worth $11,540 today, despite the cryptocurrency's uncomfortable volatility along the way. Upcoming Bitcoin halving and recent ETF approvals could signal more bullish trends for long-term Bitcoin investors.
In the last 10 Years, the Bitcoin (^BTC) Commodity obtained a 64.86% compound annual return, with a 76.96% standard deviation. Discover new asset allocations in USD and EUR, in addition to the lazy portfolios on the website.
Bitcoin Returns Over the Last Decade
On average, it has returned 671% per year, with the strongest returns in 2013 when it skyrocketed over 5,000%—climbing from $13 to $1,100. Between 2017 and 2019, bitcoin saw another impressive run as prices climbed to $20,000 as it become more well known to the wider public.
What is considered a bad Sharpe ratio?
A Sharpe ratio less than 1 is considered bad. From 1 to 1.99 is considered adequate/good, from 2 to 2.99 is considered very good, and greater than 3 is considered excellent. The higher a fund's Sharpe ratio, the better its returns have been relative to the amount of investment risk taken.
The Sharpe ratio is calculated by subtracting the risk-free rate of return from the expected rate of return, then dividing the resulting figure by the standard deviation. A Sharpe ratio of 1 or better is good, 2 or better is very good, and 3 or better is excellent.
What is Sharpe Ratio? The Sharpe Ratio is the difference between the risk-free return and the return of an investment divided by the investment's standard deviation. In simple words, the Sharpe Ratio adjusts the performance for the excess risk taken by an investor.
One bitcoin is divisible into 100 million satoshis. Satoshis give Bitcoin great divisibility and flexibility. Layers on top of Bitcoin can further subdivide satoshis, giving Bitcoin potentially infinite divisibility.
The stock-to-flow ratio is calculated by dividing the current circulating supply of Bitcoin by the annual flow (issuance) of new coins. A higher stock-to-flow ratio indicates higher scarcity. The model suggests that as Bitcoin's scarcity increases, its price may rise due to the market's perception of its value.
A higher S2F value implies it would take more years to mine the current supply. Therefore, a higher S2F means the asset is scarcer. Mining data from blockchain.com puts bitcoin's current S2F at 57 years, while data from the World Gold Council gives us a S2F of 58 years for gold.
Typically, the higher the Sharpe ratio, the more attractive the return and the better the investment. However, if the calculation results in a negative Sharpe ratio, it means one of two things: either the risk-free rate is greater than the portfolio's return, or the portfolio should anticipate a negative return.
A negative Sharpe ratio means the portfolio has underperformed its benchmark. All other things being equal, an investor typically prefers a higher positive Sharpe ratio as it has either higher returns or lower volatility.
The current S&P 500 Portfolio Sharpe ratio is 2.52. A Sharpe ratio higher than 2.0 is considered very good.
As a rule of thumb, a Sortino ratio of 2 and above is considered ideal.
What does a Sharpe ratio of 0.2 mean?
A Sharpe Ratio of 0.2 means volatility of the returns is 5x the average return. Some investors may not want investments that are up 10% one month and down 15% the next month, etc., even if the investment offers a higher overall average return.
Generally, a good alpha is one that is greater than zero when adjusted for risk.
If you had invested a whopping $10,000 in Bitcoin 10 years ago, you could potentially sell them today for $12,532,862, making you rich as hell. Bitcoin is undoubtedly the king of the crypto market and is seen as a store of value.
Cryptocurrency is a very volatile asset and unlike stocks, often does not have rationale behind price movements apart from market sentiment. However, based on all of this analysis, I believe that $100K BTC is definitely possible, which means you would need about 10 BTC to be a millionaire by 2030.
On July 1, 2013, Bitcoin traded for around $90.80. A $1,000 investment in Bitcoin could have purchased 11.0132 BTC at the time. Based on a price of $34,055.98 at the time of writing, the $1,000 investment would be worth $375,065.32 today. This represents a hypothetical return of 37,406.5% over the last 10 years.
