Data shows that the Tron Sharpe ratio has observed a rapid increase in territory that has proven bearish for the value of TRX in the past.
Sharpe ratio could imply Tron is overheated now
As an analyst explains in a CryptoQuant Quicktake article, the 180 days of the Tron Sharpe ratio now trigger a red alert. The “Sharpe Ratio” here refers to an indicator that compares the returns of a given asset with its risk.
Its value is calculated as the difference between the asset’s expected return and the risk-free rate of return, divided by the volatility. This metric tells us whether the commodity’s returns are worth the risk it carries.
Below is the chart shared by the quant that shows the trend of the 180-day version of the Sharpe ratio for Tron over the past few years:
The value of the metric seems to have been sharply going up in recent days | Source: CryptoQuant
As shown in the chart above, the 180-day Tron Sharpe ratio has recently seen rapid growth and has reached what was historically the “red” zone.
In the chart, the quant highlighted cases of metric penetration in this region over the past few years. TRX generally appears to have peaked whenever the indicator’s value has reached that peak.
Tron is now in this same high-risk zone again, but the coin may not immediately make a high since the indicator is still at a lower level than some highs. The analyst, however, warns:
Even though TRX may continue its short-term uptrend, holding positions in a high-risk zone like this can be detrimental. The potential for gains becomes limited compared to the increased likelihood of a sharp decline, making it an unfavorable situation for long-term strategies.
It remains to be seen how the price of the cryptocurrency will move from here on, considering the trend that has been evident in its 180-day Sharpe ratio.
Separately, Tether’s stablecoin offering, USDT, has recently seen considerable growth in the Tron network, as highlighted by CryptoQuant community analyst Maartunn in an X article.
The value of the metric appears to have been sharply going up recently | Source: @JA_Maartun on X
USDT supply on Tron has grown from $47.75 billion to $65.7 billion over the past year, representing an increase of over 37%. This rise naturally shows how interest in using the stablecoin has increased on the network.
TRX Price
Tron crossed the $22 level a few days ago, but it appears that the asset has since seen a slowdown in the bullish momentum, as its price is now floating around $20.
Looks like the price of the coin has observed considerable growth over the last few weeks | Source: TRXUSDT on TradingView
Featured image of Dall-E, CryptoQuant.com, chart from TradingView.com
