You hear a lot of talk about "Ethereum Beta" on the timeline, but which ones are just noise and which ones are true beta? I looked up the data from the last year and found the following.
First, the limiting conditions:
I only looked at projects that have been around for more than a year. Yes, there may be some new projects that fit the “ETH beta” category, but there is not enough data yet to do a proper analysis.
I read:
I also included $BTC as a control.
First, relevance
Correlation refers to the extent to which price movements in asset A can be explained by price movements in asset B.
The higher the correlation (the closer it is to 1), the more closely prices move in sync.
Some observations:
- Both ETH Scaling and LSD tokens have good correlation with ETH.
- Overall, ETH and BTC have the highest correlation, which is not very interesting.
We see that more volatile assets (memos, apps) score lower because their prices fluctuate more dramatically.
The reason why, in my opinion, correlation analysis doesn’t tell the whole story is that when someone wants “ETH Beta,” they’re usually looking for Altcoin that outperform ETH on “green” (up) trading days (and/or perform worse on ETH “red” (down) trading days). Let’s look at this next.
If we look at the “green” and “red” days separately, we can see if the price of these other currencies has risen or fallen more than ETH.
We can also use multiples to see the average increase or decrease of these coins. For example, if the price of ETH is +1%, then we can see that the average daily price of BTC is +1.22%.
From this perspective, we can see that $PEPE performs best when ETH is rising, averaging 6.48 times the price change of ETH (i.e., for every +1% daily average increase in ETH, $PEPE is +6.48%).
Next are $OP , $ENS , and $LDO , which have impressive multiples, but their "hit rates" are much lower than $PEPE .
This analysis surprised me quite a bit. PEPE’s use as ETH beta has been discussed before, but I didn’t expect it to be the outright winner.
It is worth noting that it is the newest of the coins studied. Perhaps other (newer) coins would be strong contenders?
Finally, there is still a lot of noise in the data, $PEPE seems to be the best choice, but it still underperformed ETH on 35% of ETH up days. Maybe leveraged ETH is the best ETH beta.
