One of the most important key indicators in the cryptomarket
Today we look at another popular ratio, which can also be used in the crypto market … the so-called Sharpe Ratio:
▶️The Sharpe Ratio indicates how well an investment compares to the return on a risk-free investment such as US government bonds.
▶️It determines the quality of the returns, so to speak, because you don’t look at them in isolation, but in relation to the risk.
How can such a Sharpe ratio be interpreted?
- A ratio of more than 1.0 is considered acceptable. - A ratio of more than 2.0 is considered very good. - A ratio of 3.0 or higher is considered excellent. - A ratio below 1.0 is considered suboptimal. - Negative Sharpe Ratio means that the risk-free interest rate is higher than the return of the Portfolio, or that the return of the Portfolio is likely to be negative.
▶️Bitcoin has achieved a higher risk-adjusted return than other major asset classes. Bitcoin’s 4-year Sharpe ratio has consistently been above 2.0, reaching above 3.0 in 2019.
▶️This is also a reason why in economically turbulent times, such as the current one, more and more well-known people diversify their portfolios with Bitcoin.
▶️While Bitcoin was still referred to as scam and rat poison in 2017, more and more well-known people are speaking out for Bitcoin’s potential as a safe haven!
✅The higher the general acceptance, the smaller the time window — don’t forget that!
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