How does the beta coefficient impact the risk and return of digital currencies?

3 answers

• Bhanu PratapJan 28, 2025 · 5 months ago
  The beta coefficient is a measure of the sensitivity of a digital currency's returns to the overall market returns. A beta greater than 1 indicates that the currency is more volatile than the market, while a beta less than 1 suggests lower volatility. Higher beta currencies tend to have higher potential returns, but also higher risk. Lower beta currencies, on the other hand, may offer more stability but potentially lower returns. Therefore, the beta coefficient plays a crucial role in assessing the risk and return trade-off for digital currencies.
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• Bengtson FlanaganJan 30, 2022 · 3 years ago
  When it comes to digital currencies, the beta coefficient can be seen as a gauge of how closely their price movements align with the broader market. A beta of 1 means that the currency moves in line with the market, while a beta greater than 1 indicates a higher degree of volatility. On the other hand, a beta less than 1 suggests that the currency is less volatile than the market. In terms of risk and return, higher beta currencies can offer the potential for greater gains, but also carry a higher level of risk. Lower beta currencies, on the other hand, may provide more stability but with potentially lower returns.
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• sabar din dawarJul 19, 2022 · 3 years ago
  The beta coefficient is an important metric for assessing the risk and return of digital currencies. It measures the currency's sensitivity to market movements, indicating how much the currency's price is likely to move in response to changes in the overall market. A beta greater than 1 suggests that the currency is more volatile than the market, while a beta less than 1 indicates lower volatility. This information is crucial for investors as it helps them understand the potential risks and rewards associated with investing in digital currencies. At BYDFi, we consider the beta coefficient as one of the factors when evaluating the risk and return profile of different digital currencies.
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