NYDIG: Sharpe ratio shows Bitcoin returns are “differentiated” and can compensate for volatility risk

Odaily News According to data from New York Digital Investment Group (NYDIG), despite its high volatility, Bitcoin is the asset with the highest return. In an analysis published recently, Greg Cipolaro, global head of research at NYDIG, said that Bitcoin's returns are "different" and compared it to other asset classes using the Sharpe ratio. This ratio is used in finance to assess the performance of an asset relative to its risk. Specifically, it calculates the ratio of excess returns to the volatility of those returns, and the higher the Sharpe ratio, the better the risk-adjusted performance. Cipolaro provided the Sharpe ratios of other asset classes (including stocks and bonds) for different holding periods, using monthly total returns to create a rolling Sharpe ratio. He concluded from the data: "Compared to almost all asset classes, Bitcoin is in a favorable position in every indicator in every time frame." Cipolaro pointed out that gold's Sharpe ratio in the past 12 months was slightly higher, but the two were so close that the gap was "insignificant." On October 7, a Goldman Sachs report said that despite a 40% increase in Bitcoin so far this year, its performance was not enough to compensate for its volatility. Cipolaro refuted: "The analysis shows the opposite. The risk (price volatility) borne by Bitcoin investors is compensated in terms of returns." Cipolaro also pointed out that while the Sharpe ratio is useful for comparing risk-adjusted returns, absolute returns are the ultimate key to fulfilling financial obligations. He added that this indicator does not reflect all the risks that investors may face, such as censorship or asset seizure. (Cointelegraph)