Indicator Overview

The Sharpe Ratio (ETH) indicator measures Ethereum’s risk-adjusted return by calculating the annualised excess return over a risk-free rate (fixed at 3%) divided by the standard deviation of returns, using user-selectable rolling windows (90-day, 180-day, 365-day, or 730-day). The metric is displayed on the primary axis with a dual-gradient colour scheme, red intensifying for negative values (poor risk-adjusted performance) and bright green intensifying for positive values (strong risk-adjusted performance), while Ethereum’s price is overlaid on a secondary logarithmic axis in white for contextual reference.

How To Use

High and rising Sharpe Ratio values (especially above 1.0–2.0) signal strong risk-adjusted outperformance, highlighting efficient Ethereum bull markets, successful narrative-driven rallies (e.g., upgrades, DeFi/Layer-2 growth), and attractive reward-to-risk conditions for holding or entering positions, while low or negative values reveal periods of weak returns relative to volatility, commonly seen in bear markets, post-upgrade drawdowns, or network congestion-driven inefficiencies. Divergences, such as ETH price hitting new highs while the Sharpe Ratio lags or deteriorates, caution of unsustainable momentum and potential tops, whereas price corrections accompanied by a recovering Sharpe Ratio indicate improving fundamentals and impending bullish phases. Traders monitor crosses above zero for transitions into positive risk-adjusted regimes, sustained elevated readings for trend strength, or breakdowns below supports as signals to reduce exposure, aiding optimal timing of entries, position management, and cycle analysis in Ethereum markets.