Indicator Overview

The Sortino Ratio is a high-fidelity risk-adjusted return metric specifically calibrated for Bitcoin’s unique volatility profile. While the more common Sharpe Ratio penalises all price swings equally, the Sortino Ratio focuses exclusively on "bad" volatility — downside risk. It measures the excess return Bitcoin provides for every unit of downward price movement.

By isolating downside deviation, this indicator distinguishes between healthy, high-conviction rallies (which often have high total volatility but low downside risk) and unstable blow-off tops. The smooth, colour-mapped gradient visualises the efficiency of Bitcoin’s price action, helping traders identify regimes where the asset is providing outsized rewards relative to the risk of a drawdown.

How To Use

Traders can use the Sortino Ratio to gauge trend quality and identify historical extremes where Bitcoin's risk-reward profile becomes overextended or exceptionally favourable.

• Risk-Adjusted Gradient: The line transitions through a deep blue-to-orange palette. Deep Blue segments indicate low risk-adjusted returns (often found during deep bear markets or consolidations), while Bright Orange segments signal periods of extreme return efficiency, typical of high-momentum bull market phases.

• The Zero-Line Equilibrium: A Sortino Ratio above zero indicates that Bitcoin is outperforming the risk-free rate (set at 3%) relative to its downside risk. Persistent movement above the zero-line suggests a high-conviction trend, while a dip below zero often signals structural trend exhaustion.

• Variable Windows: The "Window" toggle allows you to view the ratio over different time horizons (90-day to 2-year). Shorter windows are ideal for Swing Trading to spot local momentum shifts, while longer windows provide a Cycle Trading view of Bitcoin’s macro efficiency.