Bitcoin’s potential gains don’t outweigh the risk as an important Wall Street signal signals caution.

Bitcoin (BTC $88,726.94) is showing signs that its potential rewards may no longer justify the risks, as its Sharpe Ratio — a measure of risk-adjusted returns — turns negative.

Data from CryptoQuant indicates that the ratio has slipped below zero, suggesting that recent price swings are not delivering enough returns to offset volatility. Even though BTC has pulled back from October highs above $120,000, sharp intraday swings and uneven rebounds continue to compress risk-adjusted performance.

Historically, Bitcoin’s Sharpe Ratio has turned negative during the depths of bear markets, including in late 2018 and 2022, often remaining depressed for months after sharp price drops. This has led some analysts and social media commentators to speculate that the latest reading could signal a potential end to BTC’s downtrend and the beginning of a new bull cycle.

Analysts caution that a negative Sharpe Ratio does not predict price direction. “It doesn’t call bottoms with precision,” said a CryptoQuant analyst. “It shows when risk-reward has reset to levels that historically precede major moves. We’re oversold—not because prices can’t go lower, but because the risk-adjusted setup favors long-term positioning.”

Traders usually watch for a rebound in the ratio toward positive territory, which historically aligns with improving risk-reward dynamics and the start of renewed upward momentum. For now, Bitcoin trades near $90,000 amid ongoing volatility and underperformance versus gold, bonds, and global tech stocks.