Bitcoin continues to prove itself as a standout asset, offering remarkable returns even amidst its notorious volatility, according to a new report by the New York Digital Investment Group (NYDIG).
In an analysis, Greg Cipolaro, NYDIG’s Global Head of Research, noted that Bitcoin’s performance “stands apart from the crowd” when evaluated using the Sharpe ratio, a popular metric in finance for comparing returns relative to risk.
Sharpe Ratio
The Sharpe ratio, which measures the excess return an investor receives for taking on additional volatility, showed Bitcoin ranking favorably against traditional asset classes, including equities and bonds.
Cipolaro’s analysis, based on rolling Sharpe ratios using monthly returns, emphasized that Bitcoin consistently performs well across multiple timeframes. “Bitcoin ranks favorably compared to nearly every asset class on every metric over every time frame,” Cipolaro noted.
Bitcoin and Gold: A Close Comparison
Interestingly, Cipolaro pointed out that gold had a slightly higher Sharpe ratio than Bitcoin over the past 12 months. However, he downplayed the significance of this, stating that the difference was negligible and amounted to “splitting hairs.” Despite gold’s minor lead, the report underscored that Bitcoin’s long-term risk-adjusted returns remain highly competitive.
This analysis contradicts a recent Goldman Sachs note from October 7, which argued that Bitcoin’s volatility made it a less attractive investment despite its 40% year-to-date price increase. Cipolaro responded directly to this, asserting, “The risks that Bitcoin investors endure are more than made up for in terms of returns.”
Meanwhile, CryptoQuant CEO Ki Young Ju, recently noted that the Bitcoin Google search has dropped to its lowest in 2024.
Returns, Not Just Risk, Matter Most
While Sharpe ratios provide valuable insight into how assets perform relative to risk, Cipolaro also reminded investors that absolute returns are the key to meeting financial goals. In his view, focusing solely on risk-adjusted metrics may overlook other essential factors, such as the potential for asset seizure or censorship.
At the time of publication, Bitcoin had retreated from its October 13 intraday high of $63,150, trading around $64,150.
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