Sharpe Ratio Signals Imminent Bitcoin Rally

The risk-reward ratio of digital gold is most attractive since mid-2023.

The risk-reward ratio of digital gold has become the most attractive since mid-2023, according to CryptoQuant data.

The Risk-Reward Setup That Only Appears Once Every Few Years

“The Bitcoin Sharpe Ratio has collapsed back toward the zero line, a level historically associated with moments of maximum uncertainty and the early stages of risk repricing.” – By @MorenoDV_ pic.twitter.com/X5LoLZErmc

— CryptoQuant.com (@cryptoquant_com) November 24, 2025

The Sharpe Ratio has dipped into negative territory for the first time since June last year. Analyst MorenoDV noted that a similar market structure was observed in 2019, 2020, and 2022. During those periods, the indicator remained low before forming multi-month upward trends.

The expert emphasized that current values do not guarantee a bottom but indicate a high potential for future profits. For a trend reversal confirmation, the metric must turn upward.

Asset Undervaluation

Charles Edwards, founder of Capriole Investments, also pointed to the asset’s oversold condition. The Bitcoin Heater indicator, which assesses the “overheating” of the futures and options market, fell to 0.09, the lowest level since November 2022.

All of you are short Bitcoin apparently. We have some big headwinds to resolve (like institutional selling), but I cannot be bearish with Heater in the deep green zone today + fundamental value across the board. I suspect higher for at least the next week. pic.twitter.com/VxLE9pprQq

— Charles Edwards (@caprioleio) November 25, 2025

According to Edwards, despite seller pressure, fundamental indicators remain strong. The NVT metric (market value to transaction volume ratio) also signals the first cryptocurrency’s undervaluation.

Historical Anomalies

Over the past seven days, more than 8% of the total market supply of coins has moved on the Bitcoin network. Joe Burnett, Director of Strategy at Semler Scientific, highlighted this.

More than 8% of all bitcoin moved in the last 7 days.

The last two times this happened?

1. March 2020 — $5,000 BTC
2. December 2018 — $3,500 BTC

This makes the latest drawdown one of the most significant on-chain events in bitcoin’s history. pic.twitter.com/wOKHTZ7Sia

— Joe Burnett, MSBA (@IIICapital) November 24, 2025

The expert noted that such activity was recorded only twice before. Both instances coincided with local price lows:

• March 2020 — price ~$5000;
• December 2018 — price ~$3500.

Burnett described the current drawdown as one of the most significant events in the history of the first cryptocurrency’s blockchain.

Actions of Major Players

Amid the price decline, major players are increasing their positions. According to Santiment, since November 11, the number of wallets with a balance of at least 100 BTC has increased by 91 addresses.

🐳 The number of wallets holding at least 100 Bitcoin has risen by +0.47% (91 wallets) since November 11th. Meanwhile, small wallets (especially 0.1 $BTC or less) have been shrinking in number. Retail capitulation will generally play out well for crypto prices in the long run. pic.twitter.com/I0C6EV24QV

— Santiment (@santimentfeed) November 25, 2025

Meanwhile, the number of small holders (less than 0.1 BTC) is decreasing, which is historically considered a positive signal for long-term growth.

Conflicting Forecasts

However, not all market participants are optimistic. Trader Peter Brandt described the current price recovery as a “dead cat bounce” within a broader downtrend.

Meow??? How high can the cat bounce? pic.twitter.com/oOrvncOLlH

— Peter Brandt (@PeterLBrandt) November 25, 2025

Conversely, analysts at Swissblock stated that the fundamental indicators of the first cryptocurrency are in an upward trend, despite tough macroeconomic conditions.

Bitcoin, what is the plan?

Survive the liquidity drought.
Macro has tightened the liquidity, but fundamentals are still trending up.

Once liquidity turns, price will follow. pic.twitter.com/N59iT06sOm

— Swissblock (@swissblock__) November 24, 2025

Experts noted that the market is facing a liquidity shortage. This restrains the price but does not negate the positive forecast. Swissblock believes that once capital inflows resume, Bitcoin prices will rise.

In November, Anthony Pompliano, founder of Pomp Investments, explained that the pressure on the first cryptocurrency’s price is linked to institutional reactions, as newcomers from Wall Street were unprepared for sharp price fluctuations.