A notable weakening in Bitcoin’s risk-adjusted return outlook came to the fore. The Sharpe ratio, which measures return relative to volatility, fell to minus 20 on June 11. In past cycles, this threshold has coincided with periods of long-term accumulation in Bitcoin.
Sharpe ratio nears historical bottom
The decline in the Sharpe ratio to minus 20 coincided with significant bottom areas in the bear markets seen since 2015. The data fell below this threshold on January 5, 2015, and remained there until June 12, before Bitcoin entered a more permanent recovery phase.
A similar picture was observed between December 8, 2018 and March 7, 2019. During the said period, the indicator remained mostly below minus 20 for about three months. The same signal was repeated between October 7, 2022 and January 7, 2023, and after this period, Bitcoin started a new upward trend.
While no single indicator can definitively point to a market bottom, periods in which the Sharpe ratio falls below minus 20 have historically often coincided with extended accumulation phases for Bitcoin.
Sharpe ratio is known as a financial indicator that measures how much return an asset offers per risk it takes. For this reason, although it is not considered the sole determinant in the crypto market, it is closely monitored in evaluating long-term trends.
While the amount of Bitcoin in exchanges decreased, savings addresses accelerated
On-chain data also pointed in a similar direction. Stock exchange reserves, which were at 2.79 million BTC in February, decreased to 2.71 million BTC on Monday. Thus, a decrease of approximately 80 thousand BTC was recorded.
Between the end of April and the beginning of June, reserves showed a short-term recovery from a bottom of 2.65 million BTC during the year to 2.73 million BTC. However, in the last two weeks, balances decreased again by approximately 12 thousand BTC.
In the same period, demand from savings accounts strengthened significantly. Between June 1 and June 14, this wallet group was seen collecting 125 thousand BTC. In the first two weeks of June, demand in savings addresses more than doubled, from 115 thousand BTC to 240 thousand BTC. These addresses are generally monitored for their tendency to keep their assets for long periods of time rather than distributing them.
The period below the 100-week average continues
Bitcoin price has been trading continuously for 133 days below the 100-week simple moving average, currently located near $88,466. This indicator is among the important technical levels used to monitor the long-term market trend.
Past cycles show that Bitcoin can stay below this average for long periods of time. After the 2013 peak, the price remained below this line for 378 days and remained horizontal between $200 and $400. In the 2018 and 2019 bear markets, this period reached 175 days and the price remained in the range of 3,000 to 6,000 dollars.
The longest period was recorded after the 2022 decline. Bitcoin spent 532 days below its 100-week average, during which time it traded between $16,000 and $25,000. While the average of the three cycles is approximately 362 days, the current 133-day period appears to be significantly below the historical average. Previous examples indicate that such periods of compression may last for several more months.
