Bitcoin (BTC) Flashes Rare Risk-Reward Signal Seen Only 3 Times Since 2019

Amidst a slight market recovery, Bitcoin (BTC) rose to $87,372. The world’s largest crypto asset appeared to have reentered a crucial zone that preceded past rallies.

While this offers an improved risk-adjusted potential, short-term noise may still dominate.

Bitcoin’s Attractive Risk Window

According to a new analysis from CryptoQuant, Bitcoin’s Sharpe Ratio has slipped back near the zero threshold. In previous instances, this particular zone has historically corresponded with high uncertainty and the early phases of market risk repricing. The analysts point out that Bitcoin has now moved into the same environment seen in 2019, 2020, and 2022, when the Sharpe Ratio stayed depressed before fresh multi-month trends emerged.

While this metric alone does not indicate that the market has reached a bottom, it does suggest that the quality of forward returns could improve if the market steadies and volatility cools. The report further explained that investors seeking asymmetric opportunities usually find stronger conditions in low-Sharpe environments than during high-Sharpe euphoric periods.

This behavior is consistent with contrarian investment strategies that favor times when risk-adjusted performance appears weak in hindsight but promising in the future.

Despite this, the analytics platform said that “conviction should still be measured,” as short-term noise may continue to dominate until the Sharpe Ratio begins rising again. Currently, Bitcoin is not flashing a clear trend recovery, but the overall setup points toward a more favorable risk-adjusted outlook.

BTC Bounce Is a Trap?

Certain market commentators also believe that short-term price action may still be driven more by sentiment shifts than by structural improvement. Doctor Profit posted that Bitcoin’s recent rise is not happening because the market is truly bullish, but because traders need to feel bullish again. He says liquidity is being built during the declines. If the market shows 1-2 weeks of upward movement, people will turn optimistic, and that renewed confidence is when the next drop is likely to begin.

The analyst had previously said that Bitcoin was already sitting in a strong bear market. He noted that a bearish divergence had been playing out since the summer, followed by a death cross and the first confirmed loss of the EMA50W in this cycle. According to him, liquidity had dried up sharply, with repo markets empty and retail investors showing no signs of capitulation.

He added that the current structure resembles the bearish fractal seen in 2021-2022 and warned that bank liquidity had fallen to levels last seen during the Credit Suisse collapse. The analyst also highlighted the weakening Japanese yen, serious trouble at the Bank of Japan, and a wave of liquidations among trading firms and institutions after October 10.

As stock market insiders sold heavily and regional banks were under pressure, he warned that many retail traders still believed in a bull market and continued buying dips despite these risks.

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