Analysts flag bear-market signal as Bitcoin Sharpe ratio sinks
Bitcoin Sharpe ratio has fallen to -10, a level that on-chain analysts say has historically appeared during late-stage bear-market conditions, even as Bitcoin rebounded from a sharp dip toward $60,000 to trade around $71,000 at the start of the week.
The Sharpe ratio is a risk-adjusted performance measure that compares returns with the volatility taken to achieve them. A reading below zero indicates recent returns have been negative relative to the level of risk, meaning investors have not been compensated for volatility over the period captured by the metric. The latest slide pushed the ratio to its lowest level since March 2023, according to CryptoQuant data referenced by the analyst.
The analyst, posting on X under the name Darkfost, described the indicator as entering a zone that has aligned with the final phases of bear markets in prior cycles, while cautioning that it should not be treated as a definitive signal that a bottom is already in. Instead, the post framed the setup as a period when the risk-to-reward profile can become “extreme,” with conditions that have historically preceded reversals rather than confirming them in real time.
Historical comparisons highlighted two earlier stretches when the Sharpe ratio was even lower: late 2018 into early 2019 and late 2022 into early 2023, both of which corresponded with the depths of those market drawdowns. In the same thread of analysis, Darkfost noted that the metric moved back to zero in November 2025, when Bitcoin saw a local low near $82,000.
The move into deeper negative territory comes against a backdrop of heavy price damage from the prior peak. Bitcoin fell to $60,000 on Friday before recovering into the low $70,000s by Monday (Feb 09, 2026), and it remains down about 44% from an October high near $126,000.
Not all market watchers are treating extreme readings as a reason to rush back in. In a separate market note cited in the report, analysts at 10x Research said that while sentiment and technical indicators were nearing extreme levels, the broader downtrend still looked intact, adding that the absence of a clear catalyst reduced the urgency to take risk.
For now, the Sharpe ratio’s drop consolidates a simple message from the data: volatility remains high, and recent performance has been weak enough that risk-adjusted returns have deteriorated to levels previously seen around major cycle lows–while the timing of any sustained reversal remains uncertain.
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