Emily Walker
Recent data indicates that the Sharpe Ratio for Tron has sharply risen, entering a zone historically associated with declining TRX values.
Tron’s Sharpe Ratio Suggests Possible Overextension
An analyst’s insights from a CryptoQuant Quicktake article reveal that the 180-day Sharpe Ratio for Tron is signaling caution. The Sharpe Ratio is a metric used to measure how much return an asset is generating relative to its risk.
This ratio is obtained by subtracting the risk-free rate from the asset’s expected return, then dividing that by the volatility of the asset. This helps assess if the potential returns justify the risks taken.
The following chart illustrates the recent trends of Tron’s 180-day Sharpe Ratio over the past few years:
The graph indicates that the Sharpe Ratio for Tron has surged recently and re-entered a historically concerning ‘red’ zone.
The highlighted points on the chart show that every time this ratio has entered such a level in recent years, TRX typically reached a peak soon after. Currently, Tron sits in this high-risk zone; however, it is worth noting that the ratio has not hit its maximum levels from past peaks. Notably, the analyst warns:
Although TRX might see short-term gains, remaining invested in this precarious territory could pose risks. The prospects for profits may diminish against the backdrop of an increased chance for a sharp decline, making it a challenging scenario for those with long-term strategies.
It is uncertain how the price of the cryptocurrency will react under these conditions, especially in light of the changes reflected in its 180-day Sharpe Ratio.
In other developments, the supply of Tether’s stablecoin, USDT, has significantly increased on the Tron network, as pointed out by CryptoQuant analyst Maartunn in a recent X post.
The USDT supply on the Tron network expanded from $47.75 billion to $65.7 billion in the past year, a growth of over 37%. This increase indicates a rising interest in utilizing the stablecoin across the network.
Current TRX Price Status
Recently, TRX managed to surpass the $22 mark, but it has since experienced a pullback in bullish activity, and the current trading price hovers around $20.