Bitcoin’s Risk-Adjusted Returns Decline Amid Volatility in Early 2025
Bitcoin has faced a turbulent start to 2025, with sharp price swings leading to a decline in its risk-adjusted returns, according to data from research firm Ecoinometrics.
While Bitcoin’s total returns over the past year have remained in line with gold—a traditional safe-haven asset—its risk-adjusted performance suggests it is behaving more like a major stock index, with heightened volatility impacting its profitability metrics.
Risk-adjusted returns evaluate an asset’s profitability relative to its price fluctuations. A higher ratio signals strong returns with lower volatility, while a lower ratio reflects increased instability.
A combination of trade war concerns, escalating geopolitical tensions, and uncertainty surrounding President Trump’s stance on cryptocurrency regulations have contributed to Bitcoin’s recent struggles. As a result, Bitcoin is down modestly so far in 2025, while gold has surged over 11% year-to-date.
“Bitcoin and gold currently exhibit no correlation, with a 20-day moving average on a five-year time frame showing a negative relationship,” said CoinDesk analyst James Van Straten. “Historically, when this correlation turns negative, Bitcoin tends to be at a market bottom—this was evident in early 2023, summer 2023, summer 2024, and now. BTC typically rebounds to align with gold’s trajectory.”
This shift could influence Bitcoin’s attractiveness to institutional investors, who generally seek assets with strong risk-adjusted returns. While Bitcoin’s long-term positioning as “digital gold” remains intact, its short-term behavior increasingly resembles that of equities rather than a traditional safe-haven asset.
