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Bitcoin Beats Stocks, Gold, Bonds in Risk-Adjusted Returns: Research



Bitcoin has fared better than the world’s largest hedge fund based on its risk-adjusted returns, reveals Messari in its recent research note.

The data analysis platform noted that Bitcoin’s Sharpe Ratio — a barometer that measures an investment’s performance with a risk-free asset (such as US treasuries), adjusting for its risk — is ‘3.’ In comparison, Bridgewater has a Sharpe Ratio of 1.48 for its “all-weather” portfolio that contains cash, stocks, bonds, and gold.

Bitcoin Growth

Experts agree that a Sharpe Ratio reading of more than ‘1’ for an asset shows its potential to perform well in all market conditions. Therefore, stocks and real estates look stronger for their lower correlation with traditional assets, primarily metal, and bonds. The chart below illustrates the same.

Bitcoin has the highest Sharpe Ratio than traditional assets. Source: Messari

Mira Christanto, the Messari report author, noted that Bitcoin had shown the lowest correlation compared to other asset classes like equities, gold, crude oil, etc. in the last three years. That has increased the cryptocurrency’s appeal among investors because of its ability to offset an investment portfolio’s potential loss.

“Sovereign wealth and pension funds are paying attention [to Bitcoin],” the researcher added. “They have realized this opportunity and have begun new allocation strategies to maximize long-term value.”

Post-March 2020 Sell-Off

The Messari report also appeared as Bitcoin’s correlation with traditional assets ascended after the March 2020’s global market rout. The period saw the cryptocurrency tailing the stock market’s moves almost in unison. Nevertheless, it marched into its own bias on multiple occasions, proving that the positive correlation was — at best — zigzag.

Ms. Christanto asserted that Bitcoin remains minimally correlated with the mainstream markets. For instance, with the S&P 500, its correlation efficiency is just 0.19 on a scale of -1 to +1.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin has the lowest correlation with mainstream markets. Source: Messari

That further allows investors to look into Bitcoin as a hedge against the remainder of their portfolio full of inter-correlated assets. Messari mentioned a few names whose strategies to restructure their investments by allocating more cryptocurrencies to it worked in their favor.

For instance, Nasdaq-listed software firm MicroStrategy (MSTR) converted $425 million of its cash reserves to Bitcoin in two consecutive exchange rounds. The period between the two announcements saw its market capitalization appreciating by $494 million.

“The price reaction indicates that investors want exposure to BTC and expect further price appreciation,” wrote Ms. Christanto. “Indeed, MSTR made more profits in two months with their BTC allocation than in 3.5 years of operations.”

The attractive risk-adjusted return also attracted global payment firm Square to restructure its balance sheets with a $50 million allocation to Bitcoin. There are now sixteen corporations that hold a total of 81,054 BTC units in their reserves.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin rallies on booming institutional adoption. Source: BTCUSD on

Bitcoin’s price has surged by almost 250 percent from its mid-March nadir of $3,858.

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3 things traders are saying about Bitcoin and the state of the bull market




Bitcoin’s (BTC) dip below $29,000 on June 22 rocked the markets a handful of analysts to call for a potential drop below $20,000. 

Many traders on crypto Twitter were focused on the formation of a death cross on the Bitcoin chart as an omen for another potential drop in the price but analysts with a more contrarian point of view look at this chart pattern as a signal that it is time to buy the dip. 

Three reasons why some traders still see a bull case for Bitcoin include the appearance of the “spring” stage of the Wyckoff accumulation model, steady buying by long-term holders and the formation of a bear trap at the golden ratio that is similar to moves seen during previous bull runs.

The Wyckoff model says spring has arrived

The Wyckoff accumulation model has been all the rage amongst cryptocurrency analysts over the past month as the price action for Bitcoin has been tracking the pattern relatively closely since the May 19 sell-off.

As seen in the tweet above, Bitcoin’s plunge below $29,000 and the subsequent recovery above $32,000 has some analysts suggesting that the “spring test” seen in phase C of the Wyckoff pattern has been fulfilled. This would indicate that the bottom is in for the current correction and now begins the choppy climb higher.

If this turns out to be true, BTC would enter phase D, also known as the “markup phase” where a new uptrend is established and “pullbacks to new support offer buying opportunities” that are often seen as opportunities to buy the dip.

Related: Bitcoin drops below $36K as century-old financial model predicts big BTC crash

In phase D a breakout to new highs is expected as the cycle completes and prepares to potentially begin again once the move higher is exhausted.

Long term holders are still bullish

Another bullish sign cited by analysts is the steady accumulation by long-term holders.

The Bitcoin long-term net holder position shows that investors actually began to reaccumulate back in late April and they began to significantly increase their activity in May as the price fell into the $30,000 to $40,000. On-chain data shows that these investors have continued to buy into the most recent dip.

This activity suggests that more experienced crypto traders are familiar with Bitcoin’s market cycles and view the current range as a good level to open long positions when fear is high and the sentiment is low. 

The biggest rewards go to those who take the risk to buy an asset amid plunging prices and sentiment, and these are the types of situations where the contrarian traders thriv.

A bear trap lurks at the golden ratio

The third scenario some analysts are focusing on suggests that the current price movements have set up a bear trap that echoes a move seen during the last cycle which involves a pullback to the 1.618 golden ratio extension level which will then be followed by a breakout to new highs.

From this perspective, the market is currently in the awareness phase of the four psychological stages of asset bubbles. After the bear trap occurs, Bitcoin will enter the mania phase where widespread media coverage attracts the attention of new market participants who then chase the price to ever-increasing heights “based on the delusion that the asset will keep going up, forever.”

Previous calls for the possibility of Bitcoin reaching a price of $200,000 by the third or fourth quarter of 2021 by veteran trader Peter Brandt, who was far from alone in predicting its value to surpass the $100,000 mark this year, would suggest that the long-expected blow-off top is yet to come.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.