Risk-Adjusted Returns: Sharpe Ratios Across Crypto Assets

Methodology

We calculate annualized Sharpe ratios using daily returns with a risk-free rate of 4.5% (US 1Y Treasury yield). Sortino ratios use only downside deviation. All data sourced from daily closing prices.

12-Month Risk-Adjusted Performance

Asset	Return	Volatility	Sharpe	Sortino	Max DD
BTC	+62.4%	48.2%	1.20	1.78	-22.1%
ETH	+41.8%	56.7%	0.66	0.94	-31.4%
SOL	+124.5%	82.3%	1.46	2.01	-38.7%
AVAX	+28.3%	71.4%	0.33	0.48	-42.8%
LINK	+55.2%	63.1%	0.80	1.12	-35.2%
S&P 500	+18.7%	14.2%	1.00	1.45	-8.3%
Gold	+12.1%	13.8%	0.55	0.82	-6.1%

Key Observations

• SOL leads Sharpe rankings at 1.46, outperforming both BTC and traditional assets on a risk-adjusted basis
• BTC vs S&P 500: BTC's higher Sharpe (1.20 vs 1.00) came with 3.4x the volatility and 2.7x the drawdown
• Sortino advantage: Crypto assets show higher Sortino-to-Sharpe ratios, indicating more upside skew than traditional assets
• AVAX underperforms on risk-adjusted basis despite positive absolute returns

Portfolio Implications

A risk-parity allocation targeting 15% annualized volatility would suggest a 6-8% allocation to BTC, 3-4% to SOL, and the remainder in traditional assets. This blend historically achieves a portfolio Sharpe of 1.15-1.25 while limiting crypto-driven drawdowns to under 5% at the portfolio level.