Bitcoin price has slowed somewhat in its recovery since it retook the $91,000 level in the past week. According to the latest information about the chain, the flagship cryptocurrency seems to be entering a critical zone, which could see the price recover with more speed in the near future.
On-Chain Data suggests Bitcoin price may see recovery soon
In a Nov. 29 post on social media platform X, cryptoanalyst Ali Martinez revealed that the Bitcoin price may enter a “low risk” zone. According to the market scientist, this low-risk area has often offered solid potential buying opportunities for investors.
This evaluation revolves around the Sharpe Ratio, an on-chain indicator that assesses the risk-adjusted return of a specific crypto asset (Bitcoin, in this case). This metric basically evaluates how much profit an investment offers per unit of risk (given that risk is measured by volatility).
Usually an upswing Sharpe ratio indicates a higher risk-adjusted result, which means that the asset generates a higher return compared to the risk taken. On the other hand, when this metric is in a downward trend, it means that the coin is in a “lower risk zone” and the returns will be less significant.
Source: @ali_charts on X
As shown in the chart above, Bitcoin The Sharpe Ratio has been on a sharp declineapproaching the low-risk region (the green area). In this area, the market leader tends to offer lower returns and is often less susceptible to unexpected volatility-driven price movements.
Historically, the low-risk zone has been where long-term investors “buy the dip”, because they want to make less risky decisions in the market. Also, as observed in the highlighted chart, the Bitcoin price bottomed out (as seen at the end of 2022) when the Sharpe Ratio entered the low-risk zone.
Basically, the Bitcoin price can prepare for a market recovery when the Sharpe ratio hovers around and below the zero threshold.
Bitcoin Coinbase Premium Gap Flashes Green Again
Another on-chain metric that lends further credence to the Bitcoin price recovery hypothesis is Coinbase Premium Gap. This indicator measures the difference between the BTC price on the US-based Coinbase exchange (USD pair) and the global Binance exchange (USDT pair).
Source: @JA_Maartunn on X
When the Coinbase Premium Gap is positive, as it currently is, the metric suggests that US-based investors are buying Bitcoin aggressively. Ultimately, this demand pressure from US investors could provide the buoyancy that the Bitcoin price currently needs.
At the time of writing, the price of BTC is around $90,940, reflecting a jump of 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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