The Sharpe ratio, which measures Bitcoin’s risk-adjusted return, has historically fallen to a level that coincides with the bottoms of market cycles. According to CryptoQuant data, the indicator fell to minus 20 on June 11. The same level was previously seen at the bottoms of the 2015, 2018 and 2019 cycles and the 2022 and 2023 cycles.
Bottom signal has arrived, recovery may not start immediately
The Sharpe ratio is among the indicators that track how much return an asset offers against volatility. Therefore, it can produce important signals about the balance of risk and return in the crypto market.
However, past data reveal that a rapid rise did not begin as soon as this level was reached. In all three previous examples, the minus 20 level signaled the beginning of a prolonged bottom formation rather than a sudden jump. The indicator remained below this line for approximately five months in 2015 and for approximately three months in 2018 and 2019 and 2022 and 2023. Permanent recovery came later.
The data suggests that this signal does not directly indicate the beginning of the rise, but rather that a base may be forming.
Accumulation signs strengthened in on-chain data
Other data indicating accumulation on the on-chain side also came to the fore. Savings wallets, known for their tendency to hold rather than sell, collected approximately 125 thousand BTC in the first half of June.
Bitcoin reserves in exchanges have decreased by approximately 80 thousand BTC since February, reaching 2.71 million BTC. In addition, it was reported that large investors withdrew more than 11 thousand BTC from the stock exchanges in the last day. This picture suggests that some of the short-term selling pressure has moved away from the spot side.
All eyes in the market are on the FOMC decision
In the last two weeks, valuation and market sentiment indicators have similarly produced signals indicating a bottom formation. However, these data mostly measure accumulation and sales fatigue. These indicators are not always the factor that directly determines the price movement.
As a matter of fact, according to CoinDesk data, the main factor in Bitcoin’s rise from the bottom level of $ 59,130 to approximately $ 65,800 was the agreement between the USA and Iran. For this reason, existing on-chain signals are not considered as data that alone determines the direction of the price, but as signals that show whether the market base is strengthening or not.
The next critical headline in the market will be today’s FOMC decision. The expectation that interest rates will remain constant is largely reflected in prices. The dot chart showing expectations for the Fed’s interest rate path and Chairman Kevin Warsh’s tone regarding inflation may be decisive on the next direction.
