Bitcoin is the Only Asset With “Sharpe Ratio” More Than 1: PlanB

Bitcoin is the Only Asset With “Sharpe Ratio” More Than 1: PlanB

#Bitcoin is the only asset with a “Sharpe ratio” > 1 (return>risk)! Classic asset (stocks, bonds, gold) risk & return basically flat. Even FAANG (Facebook, Apple, Amazon, Netflix, Google) .. not even close to btc. Note I skipped bitcoin’s first years (2009-2012) and updated data. — PlanB (@100trillionUSD) January 25, 2020

PlanB makes the case that Bitcoin has an extremely high Sharpe ratio compared to the returns on other investments in much more popular assets, including the FAANG stocks, which have dominated the last decade. This is especially surprising when considering that PlanB even skipped the first few years of Bitcoin’s price history when the fledgling cryptocurrency when from having a value of $0.83 cents to a high of $424 USD in 2012. PlanB withheld the price data from 2009-2012 for his calculation. Taleb disagrees with PlanB’s Bitcoin Sharpe Ratio assessment World-renowned author of The Black Swan, Nassim Nicholas Taleb, a former options trader and risk analyst, who has been a long-time Bitcoin commentator, countered by saying that the Sharpe Ratio can not be reliably applied to BTC.

Sharpe ratio does not work for Bitcoin. — Nassim Nicholas Taleb (@nntaleb) January 25, 2020

Taleb is a brilliant trader and statistician but unfortunately did not elaborate on his claim that The Sharpe ratio and Bitcoin don’t play well together. Many other traders in the thread seemed to agree with PlanB’s initial post and echoed positive sentiments towards the Sharpe ratio claim. Bitcoin’s volatility is legendary, with the cryptocurrency often suffering corrections of 80%. It is this volatility that many detractors say that Bitcoin has no future as currency because it is too unreliable for commerce. On the other hand, traders make all their money through volatility so assets with a high Sharpe ratio are very attractive to speculators. Bitcoin advocates ask how a new cryptocurrency, with a small market cap, that came from an open-source project which was released anonymously, can become the world’s reserve currency without volatility? Despite Bitcoin’s volatility recent data has shown that it’s volatility has actually been on the decline. Wild price swings or not, many traders and Hodlers are still in profit. What do you think? Can the Sharpe Ratio be applied to Bitcoin reliably? Let us know in the comments!

Images via Shutterstock, Twitter: @100trillionUSD, @nntaleb The post appeared first on


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