Key Insights

• Bitcoin’s implied volatility has reached a two-year low at 37%, and MSTR’s volatility has decreased from 140% to 56%.
• The Sharpe ratio for BTC stands at 2.15, while MSTR is at 2.00, significantly better than most large-cap tech stocks scoring around 1.0.

Bitcoin continues to excel in risk-adjusted performance, with an impressive Sharpe ratio indicating exceptional returns relative to its volatility. Strategy (MSTR), with substantial Bitcoin assets, follows closely, reflecting strong returns as well.

A Sharpe ratio of 2 indicates that an asset has provided double the excess returns when compared to the risk-free rate for every unit of volatility, marking excellent risk-adjusted performance. This is particularly notable as many large tech stocks linger around a ratio of 1.0.

The latest data shows that both Bitcoin and MSTR have benefited from reduced volatility, with Bitcoin’s expected price fluctuations dropping, suggesting increased stability. In contrast, MSTR, serving as a leveraged Bitcoin proxy, maintains a higher volatility, though considerably lower than previous extremes.

As of the latest figures, Bitcoin has risen 27% this year, while MSTR is up 24%.

Disclaimer

The analyst who authored this article owns shares in Strategy.