Bitcoin Surpasses Ethereum in Risk-Adjusted Performance for the First Time Since July 2022

Bitcoin (BTC) currently has a Sharpe ratio of 0.97 on a four-year basis, which implies solid performance given its associated risk.

Interestingly, BTC ‘s Sharpe ratio recently outpaced that of Ethereum (ETH) for the first time since July 2022, with ETH now standing at 0.95.

The Sharpe ratio is a key financial metric that evaluates the return of an investment relative to its risk. This metric helps investors gauge what return they are getting for the level of risk they are taking.44

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To calculate it, you need to subtract the risk-free rate from the investment’s return and then divide that difference by the investment’s standard deviation (which measures risk or volatility). A higher Sharpe ratio implies a more favourable risk-adjusted return.

Among known digital assets, only Solana (1.32) and Dogecoin (1) have a higher Sharpe ratio than Bitcoin. In contrast, other major cryptocurrencies such as XRP and ADA have seen their ratios decline, indicating weaker risk-adjusted returns.

Alexander Stefanov