Bitcoin price recovery has slowed somewhat since recovering to the $91,000 level last week. According to the latest on-chain data, the flagship cryptocurrency appears to have entered a critical zone and could see a bigger price rally in the near future.
On-chain data suggests that Bitcoin price could soon rebound.
In a November 29 post on social media platform According to market experts, these low-risk areas often offer solid potential buying opportunities for investors.
This evaluation revolves around the Sharpe ratio, an on-chain metric that evaluates the risk-adjusted return of a specific crypto asset (in this case Bitcoin). This indicator essentially evaluates the amount of profit an investment provides per unit of risk (taking into account that risk is measured by volatility).
Typically, a rising Sharpe ratio indicates better risk-adjusted performance. This means that the asset generates a greater return compared to the risk taken. On the other hand, when this indicator is trending downward, it means that the coin is in the “low risk zone” and returns are less important.
Source: @ali_charts on X
As you can see in the chart above, the Bitcoin Sharpe ratio has been declining sharply and has approached the low-risk zone (green zone). Market leaders within these areas tend to offer lower yields and are often less vulnerable to price changes due to unexpected volatility.
Historically, low-risk zones have been where long-term investors “buy the dip” to make less risky decisions in the market. Moreover, as can be seen in the highlighted chart, Bitcoin price bottomed out with the Sharpe ratio entering low-risk territory (as seen in late 2022).
In essence, with the Sharpe ratio hovering near and below the zero threshold, Bitcoin price may be preparing for a market rebound.
Bitcoin Coinbase Premium Gap Flashes Green Again
Another on-chain indicator that adds credence to the Bitcoin price rebound hypothesis is the Coinbase premium gap. This indicator measures the difference between the BTC price on the US-based Coinbase exchange (USD pair) and the BTC price on the global Binance exchange (USDT pair).
Source: @JA_Maartunn on X
When the Coinbase Premium Gap is positive, as it is now, this indicator means that US-based investors are buying Bitcoin aggressively. Ultimately, this demand pressure from US investors could provide the buoy the current Bitcoin price needs.
As of this writing, the BTC price is around $90,940, up just 0.4% over the past 24 hours.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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