According to Cointelegraph, Bitcoin has been identified as the best-performing asset in terms of returns despite its volatility, as per an analysis by the New York Digital Investment Group (NYDIG). Greg Cipolaro, Global Head of Research at NYDIG, highlighted in a report published on October 11 that Bitcoin stands out for its returns when compared to other asset classes using the Sharpe ratio. This ratio evaluates the performance of an asset relative to its risk by calculating the ratio of excess returns to the volatility of those returns. A higher Sharpe ratio indicates better risk-adjusted performance.
Cipolaro provided Sharpe ratios for various asset classes, including equities and bonds, over different holding periods using monthly total returns to create rolling Sharpe ratios. He concluded that Bitcoin ranks favourably compared to nearly every asset class on every metric over every time frame. Although gold had a slightly higher Sharpe ratio over the past 12 months, Cipolaro noted that the difference was negligible.
This analysis challenges a Goldman Sachs note from October 7, which claimed that despite Bitcoin being up 40% year-to-date, its performance was insufficient to compensate for its volatility. Cipolaro argued that the risks Bitcoin investors face are more than compensated for in terms of returns. He also emphasized that while Sharpe ratios are useful for comparing risk-adjusted returns, absolute returns are crucial for meeting financial obligations. Additionally, he pointed out that the Sharpe ratio does not capture all types of risks an investor might face, such as censorship or asset seizure.
In a report released earlier in October, NYDIG analysts concluded that Bitcoin remains the best-performing asset so far this year, even after a seasonally weak third quarter. Bitcoin has traded flat over the past day following a tightly range-bound weekend, retreating from an intraday high of $63,150 during late trading on October 13 to trade at $62,560 at the time of publication.
