Data shows that the Tron Sharpe Ratio has seen a rapid rise into an area that has proven bearish for TRX’s value in the past.
The Sharpe ratio may indicate that Tron is now overheating
As explained by an analyst in a CryptoQuant Quicktake afterthe 180 days of the Tron Sharpe Ratio now flashes a red alert. The “Sharp ratio‘ here refers to an indicator that compares the return of a particular asset with its risk.
Its value is calculated as the difference between the asset’s expected return and the risk-free return, divided by the inconstancy. This measure tells us whether the return on the commodity is worth the risk.
Below is the chart shared by the quant showing the trend in 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 the chart above shows, the 180-day Tron Sharpe Ratio has recently seen rapid growth and has reached what has historically been the ‘red’ zone.
In the chart, the quant has highlighted the cases where the metric has broken this region in recent years. TRX generally seems to have reached a top when the value of the indicator has risen this high.
Tron is now in the same risk zone again, but the coin may not reach an immediate top as the indicator is still at a lower level than during some of the tops. However, the analyst warns:
While TRX could continue its uptrend in the short term, holding positions in a risky zone like this could be harmful. The profit potential is limited compared to the higher probability of a sharp pullback, making this an unfavorable situation for long-term strategies.
It remains to be seen how the price of cryptocurrency will develop from here, given the trend emerged in the 180-day Sharpe Ratio.
In other news: Tether’s stablecoin offering, USDThas recently witnessed significant growth in the Tron network, as CryptoQuant community analyst Maartunn noted in an after.
The value of the metric appears to have been sharply going up recently | Source: @JA_Maartun on X
The USDT offering on Tron has increased from $47.75 billion to $65.7 billion over the past year, which represents an increase of more than 37%. This increase obviously shows how interest in using the stablecoin on the network has increased.
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Tron broke through the $22 level a few days ago, but it seems the asset has witnessed a cooldown in bullish momentum since then as the price is now hovering around the $20 mark.
Looks like the price of the coin has observed considerable growth over the last few weeks | Source: TRXUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com