What Is Beta?
Beta measures an asset's volatility relative to a benchmark (usually BTC for crypto). A beta of 1.5 means the asset moves 1.5x as much as the benchmark — if BTC rises 10%, the asset tends to rise 15%. A beta below 1 indicates lower volatility than the benchmark, and a negative beta means the asset moves inversely.
How Beta Works
Most altcoins have betas above 1 relative to Bitcoin — they amplify BTC's moves in both directions. During bull markets, high-beta alts outperform; during bear markets, they underperform. Stablecoins have a beta near zero. DeFi blue chips (ETH, SOL) tend to have betas of 1.2-1.8 relative to BTC.
Why It Matters for Traders
Beta is a portfolio construction tool. If you want to increase exposure to market moves, add high-beta assets. If you want to reduce it, add low-beta or negative-beta assets. Understanding your portfolio's weighted beta tells you how much it will move for each 1% move in the benchmark — essential information for position sizing and risk management.
