Sharpe Ratio (180-Day)

How to read the Sharpe Ratio (180-Day)

The Sharpe Ratio measures how much return you earn per unit of risk taken. This indicator uses a 180-day rolling window of daily Bitcoin returns, annualised and compared against a 4% risk-free rate. A higher reading means Bitcoin has been delivering strong returns relative to its volatility. A deeply negative reading means it has been delivering poor returns for the volatility involved.

Unlike on-chain indicators, the Sharpe Ratio is purely price-based — it captures market stress and momentum in risk-adjusted terms. It is most useful as a contrarian signal when it reaches extremes. The algorithm matches the TradingView Pine Script Sharpe implementation, using population standard deviation scaled by √180.

• Below −2.5 — Critically Undervalued — Bitcoin's 180-day risk-adjusted return is deeply negative. This is a rare condition that has historically aligned with severe bear-market lows. It does not guarantee a bottom, but it can indicate that long-term risk/reward has improved substantially.
• −2.5 to −1 — Undervalued — Risk-adjusted returns are negative over the past 180 days. The market has been delivering poor returns relative to volatility. Historically this zone has often appeared during later-stage bear markets and can indicate improving long-term risk/reward for patient buyers.
• −1 to 3 — Fair Value — Risk-adjusted returns are within the normal historical range. No extreme signal in either direction. Long-term investors often continue their regular DCA strategy without urgency in this zone.
• 3 to 5 — Elevated — Bitcoin's 180-day risk-adjusted return is running above average. Returns are meaningfully outpacing volatility — a sign of a strong trend. Long-term investors often remain in their plan but may slow the pace of new allocations as cycle risk rises.
• Above 5 — High Risk — Bitcoin's annualised risk-adjusted return is historically elevated. Strong returns have far outpaced volatility over the past 180 days — a condition that has often appeared near late-cycle conditions. Price can continue higher, but long-term investors often become more cautious with large new allocations.

The Sharpe Ratio is best paired with on-chain indicators such as the MVRV Z-Score and NUPL to confirm whether a market extreme is supported by both price-based and network-based signals.