Bitcoin’s Risk-Reward Profile Worsened in February.

Bitcoin’s Risk-Adjusted Returns Weaken Amid Market Uncertainty

Bitcoin’s performance in early 2025 has been marked by heightened volatility, leading to a sharp decline in its risk-adjusted returns, according to data from research firm Ecoinometrics.

While Bitcoin’s total returns over the past year have been on par with gold—a traditional safe-haven asset—its risk-adjusted metrics indicate a closer resemblance to major stock indices. Increased price fluctuations have made Bitcoin a less stable investment in the short term.

Risk-adjusted returns assess an asset’s profitability relative to its volatility. A higher ratio indicates strong returns with lower risk, while a lower ratio signals greater uncertainty and instability.

Bitcoin’s struggles have been influenced by multiple factors, including ongoing trade tensions, rising geopolitical risks, and confusion over President Trump’s stance on cryptocurrency regulation. As a result, Bitcoin is slightly lower year-to-date, whereas gold has surged over 11%.

“Bitcoin and gold currently show no correlation, with a 20-day moving average over a five-year period displaying a negative relationship,” said CoinDesk analyst James Van Straten. “Historically, when this correlation turns negative, Bitcoin has been at or near a market bottom—this pattern was observed in early 2023, summer 2023, summer 2024, and now. If this trend holds, BTC may soon rally to catch up with gold.”

This shift in risk dynamics could affect Bitcoin’s appeal to institutional investors, who tend to favor assets with strong risk-adjusted returns. While Bitcoin’s long-term position as “digital gold” remains intact, its recent price action suggests it is currently behaving more like an equity than a safe-haven asset.

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