Definition
A beta coefficient is a tool for comparing and analyzing the volatility of a single asset to the volatility of the entire market or a specific portfolio.
Understanding the Term
In a traditional financial context, beta measures the volatility of an investment and is an indication of its relative risk.
Using Bitcoin as a benchmark in cryptocurrency markets, one could calculate the beta for BNB or other altcoins in relation to Bitcoin’s price and volatility. The resulting beta would give insights into the correlation between Bitcoin and traditional financial markets.
Takeaway
Beta is used to assess how much risk a certain investment will add to a current portfolio rather than measuring the risk of investment in a single asset.