Return-to-Volatility Ratio (Sharpe-Style)

The ratio subtracts a cash reference rate from the trailing one-year return and divides by the annualized standard deviation of daily returns over the same period. It borrows the shape of the Sharpe ratio in order to place return and variability on one scale. This site publishes it because readers expect it, and states plainly that it is the most heavily abused statistic in this asset class.

Hoe het wordt berekend

(trailing 1-year return - cash reference rate) / annualized standard deviation of daily returns over the same period

Waar het misleidt

The underlying derivation assumes returns are approximately normal and independent, and digital-asset returns are neither, being fat-tailed and strongly autocorrelated in stress, so the denominator understates the chance of an extreme loss and the ratio flatters precisely the assets and strategies that failed abruptly. Programs with a hidden short-volatility profile, including lending against illiquid collateral and the yield program that supported Terra's UST peg until its May 2022 collapse, displayed high ratios right up to total loss, because the loss had never yet entered the sample. Computed over any window shorter than a full cycle, the ratio mostly records which direction that window happened to point. Providers differ on the cash rate subtracted, on the annualization convention, and on whether returns are logarithmic, and these choices alone move the published number substantially.

De aandelenvergelijking, en waarom die niet opgaat

The Sharpe ratio; Sharpe was formulated for diversified portfolios with roughly normal returns measured against a meaningful risk-free rate, and none of those conditions are satisfied by a single digital asset, so this figure must not be read as a Sharpe ratio.

Een hoge of lage waarde lezen

A higher value means the period's return was large relative to the period's price variability, and a lower or negative value means it was small or negative. It describes one historical window under assumptions this asset class violates, and it is not a quality score.