Bitcoin

Gold

<p>In the world of finance, the Sharpe ratio reigns supreme. And it turns out that Bitcoin’s Sharpe ratio defies all competitors.</p>
<h2 id="h-bitcoin-s-sharpe-ratio">Bitcoin’s Sharpe Ratio</h2>
<p>With an increase of 160% since the start of the year, no other asset performs better than Bitcoin. Here are some annual performances of other popular assets:</p>
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<ul>
 <li>Gold: 11%,</li>
 <li>US 10-Year Bonds: 3%,</li>
 <li>S&amp;P: 26%,</li>
 <li>Tesla: 100%,</li>
 <li>Microsoft: 57%.</li>
</ul>
<p>However, these figures don’t tell the whole story. For equal performance, it is better to invest in an asset with lower volatility.</p>
<p>This year, Bitcoin not only has the best performance but also the best <strong>Sharpe ratio</strong>, just behind the electronic chip designer NVIDIA:</p>
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     <p lang="en" dir="ltr">NEW: <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">#Bitcoin</a> is about to close 2023 with one of the best Sharpe Ratios, second only to <a href="https://twitter.com/search?q=%24NVDA&amp;src=ctag&amp;ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">$NVDA</a> <a href="https://t.co/OGLL7J1bjQ" rel="noopener noreferrer nofollow">pic.twitter.com/OGLL7J1bjQ</a></p>— Bitcoin News (@BitcoinNewsCom) <a href="https://twitter.com/BitcoinNewsCom/status/1738937589141315638?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">December 24, 2023</a>
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<p>In the following example, stock A boasts a higher Sharpe ratio than stock B.</p>
<ul>
 <li>Stock A: closes the year 2023 up 10% after hitting a low of -5% during the year,</li>
 <li>Stock B: closes the year 2023 up 10% after hitting a low of -50% during the year.</li>
</ul>
<p>It was better to invest in stock A.</p>
<p>The Sharpe ratio expresses the performance of an asset in terms of its risk (volatility). It allows one to see at a glance if high returns are also the consequence of greater volatility, and therefore a higher risk.</p>
<p>More specifically, the Sharpe ratio is calculated by dividing the performance of an asset by a risk indicator, in other words its volatility (the standard deviation of the asset’s returns).</p>
<p>Bitcoin’s high Sharpe ratio is not new. Here is the four-year moving average of Bitcoin’s Sharpe ratio compared to other assets.</p>
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     <p lang="en" dir="ltr">In the finance world, Sharpe ratio is king, yet when it comes to bitcoin, there's a startling blind spot for Wall Street.<br><br>Bitcoin's Sharpe ratio outshines all major asset classes, empirically challenging Wall Street's outdated skepticism. It's not just an anomaly; bitcoin is… <a href="https://t.co/7KgnzMpzRX" rel="noopener noreferrer nofollow">pic.twitter.com/7KgnzMpzRX</a></p>— Joe Burnett ( <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f511.png" alt="🔑" class="wp-smiley" style="height: 1em; max-height: 1em;">)³ (@IIICapital) <a href="https://twitter.com/IIICapital/status/1739690368218673287?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">December 26, 2023</a>
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  Orange: Bitcoin / Blue: US Stock Market / Brown: Gold / Grey: Ethereum / Green: US Real Estate / Pink (dotted): Emerging Market Currencies
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<p>In summary, Bitcoin’s performance/risk ratio is excellent. Bitcoin’s Sharpe ratio exceeds that of all major asset classes over a medium-term horizon.</p>
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<p>Bitcoin proves that high returns are not always synonymous with high risk. <a href="https://www.cointribune.com/en/bitcoin-at-100000-all-planets-align/" target="_blank" rel="noopener noreferrer nofollow">Hence the arrival of Wall Street with its ETFs</a>.</p>

Bitcoin Is Soaring According to Wall Street’s Most Popular Metric

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