Why do you work hard to trade cryptocurrencies but still can't beat the market? Get a quick understanding of Alpha and Beta returns.

I don’t know if you’ve noticed, but many people seem to have been working hard in the B circle for a long time

All the opportunities for sudden wealth are circling around it, scheming and calculating until they finally realize

It’s better to hold Bitcoin

Not only that, do you know?

According to years of data from SPIVA

Over a 10-year period, 85%-95% of active funds in the US underperform the market

Such results are hard to accept

Does努力 really have no use?

Why do most people not make money?

Actually, no, behind it is science, a complete set of economic theories

This set of economic principles can be traced back to the 1960s

When the Nobel-winning Capital Asset Pricing Model was introduced

In this model, economists first proposed the concept of beta

Later, another economist named Michael introduced the concept of Alpha

Since then, Alpha + Beta has become the theoretical foundation of traditional finance

Regarded as a treasure trove of wealth by various industry giants

With the development of cryptocurrency

Today, we can still see new crypto stars like MultiCoin or Pantera

They all coincidentally adopt this investment strategy

Okay, first let’s talk about what Alpha and Beta are

This concept we learned in our first year of economics

It’s actually a basic concept covered in textbooks

Simply put, in academic terms:

Alpha is earned, beta is given

That is, the returns from Alpha are your earned money

The returns from Beta are the money given by the sky

In other words, Beta is the appreciation value of a certain asset you hold

For example, holding the S&P 500, gold, Bitcoin

Holding steady, doing nothing, and earning money

The higher the Beta multiple, the better the asset you’ve chosen

For example, holding Bitcoin for steady gains

You earn more Beta than holding the S&P 500

Now, let’s talk about Alpha

Alpha is the result of active betting

It’s what you earn by leveraging your advantages

It’s even easier to understand in terms of Bitcoin

Whether Bitcoin rises to 100,000 or 1 million

The Alpha return is to make your Bitcoin holdings grow more and more

At this point, everyone might start thinking

How can I achieve Alpha + Beta returns?

Look at my tell me

How exactly can I get excess returns?

As we mentioned at the beginning, over 90% of fund managers

Fail to generate positive Alpha

Only about 10% of people make money

And it’s this 10% who take away the vast majority of excess returns

So where exactly is this 10% of the gains?

I don’t know about other industries

But in the crypto industry, we found the answer by following the shadow of big players

We organized it into this table

It might look a bit secretive

But don’t worry, I’ll explain in a moment

After looking at this table, let’s look at this chart

In this chart, I’ve grouped assets with typical Alpha + Beta returns in the B circle

I’ve drawn a diagram for everyone

The horizontal axis is Beta value

The further right, the higher the Beta

We can see that Bitcoin’s Beta

Definitely higher than the S&P 500, right?

What about the vertical axis?

It’s the return rate

This gray line is a benchmark of risk-free interest rate

The blue section is the CARM line

This line indicates the most reasonable market expected return at different Beta values

Each point represents a strategy type

Let’s take a look along the blue line

First, notice where the blue line intersects with the gray line

The position on the horizontal axis is Beta zero

The interest rate on the left is 0.04%

This point is familiar—U.S. Treasury bonds

Or the risk-free rate

Where is the Alpha part?

It’s when this point is above the blue line

Proving it has positive Alpha

It outperforms Beta and the market

Gaining more coins as the price rises

If this point exactly falls on the blue line

It’s a pure Beta return

Meaning you just hold B steady

And if it’s below the blue line, it means you didn’t beat Beta

With this panoramic view, let’s look at some examples

To get a feel for how to earn excess profit, Alpha

First, the first type

Type one is POS staking

This is a feature unique to the B circle

Other industries don’t have this

Simply put, the principle used here

Is that blockchain is essentially a decentralized database

Who does the bookkeeping for this database?

And what do the bookkeepers get in return?

Here, there’s a solution called

Proof of Stake (POS)

Using locked coins to obtain the right to record transactions

The more B you lock, and the longer you lock it

The more the system trusts you

And is willing to give you the right to record

Your system rewards you for bookkeeping

For example,

If you want to become a validator node on the Ethereum network

What do you do?

First, prepare 32 ETH

And a computer that runs 24/7

Of course, a good broadband connection

Once ready,

Start running an Ethereum client

Like Prysm Lighthouse

And you’ll earn rewards from the system

If you experience power outages or go offline

You might face slashing

Getting your ETH slashed or penalized

Sounds a bit complicated, right?

But the B circle has some staking platforms

That handle a lot of the behind-the-scenes work

Users just need to give their B tokens to these platforms

And these platforms help with staking

For example, look at Solana staking

All exchanges have on-chain staking functions

Everyone’s yields are quite similar

The rewards you get are usually in their chain’s B tokens

For example, Ethereum rewards are in ETH

Meaning your ETH amount increases

You earn Alpha

And you haven’t sold your ETH

You can still profit as Ethereum profits

Your Beta remains intact

So this is a classic Alpha + Beta model

This model applies to all POS chains

I’ve summarized the staking yields of major chains on various platforms

Guess what?

I found a very interesting situation

I won’t reveal the answer yet

Guess which chain’s yield is the highest

Actually, it’s beyond my expectations

The highest yield surprisingly belongs to the Tron chain

After this research, I have to say

Brother Sun really knows how to make money

After analyzing, I found

Tron’s staking yield is high

The reason isn’t just high income

Everyone knows its income is high

After all, now everyone transfers U tokens via Tron chain

Ethereum and Solana have on-chain gas fees of only about 1 million per day

This income is a big drop compared to Tron’s

And Tron’s income curve is very steady

Growing steadily and reaching new heights

With the background of the stable law passing,

This trend could continue for several more years

Although its income is indeed good

But high income isn’t the main reason for its high staking yield

Research shows

Tron’s staking is different from other POS staking

It’s more like a system of collateralizing resources and renting them out for profit

Briefly explained,

In the Tron network,

When users stake their TRX tokens,

They can obtain two things

Not directly Tron coins,

But

One called bandwidth

And one called energy

Bandwidth is used for sending regular transactions

Energy is used for executing smart contracts on their chain

For example, transferring U tokens

Or DeFi operations

So we see,

Energy is the most economically valuable resource

All smart contract operations consume energy

Therefore, Tron’s energy is very valuable

There’s a platform called Tronify

Where you can stake Tron tokens to earn energy

And the system will automatically sell the energy you earn

And that’s how the income is generated

Besides, apart from single POS staking,

There’s also re-staking

What is re-staking?

Simply put,

During POS staking,

Your assets are locked up

Meaning your funds are in the bank, locked

But this doesn’t affect your status as a wealthy person

You hold a deposit certificate from the bank

And you can still stake or borrow money

The third part is liquidity mining

This is actually about creating LP pools in decentralized exchanges

Providing liquidity for on-chain trading pairs

This method can also earn some Beta

But the risks are not low

And creating LP pools for mining

This method isn’t the most typical Alpha + Beta

The most typical are Bitcoin or Dogecoin mining under POW mechanisms

Bitcoin mining is a very representative

Beta + Alpha composite model

Let’s understand briefly

Bitcoin mining is basically using machines similar to computers to produce Bitcoin

Visit Bitmain’s official website

You can see all kinds of machines

Plug these machines in, power on,

Connect to the internet and mining pools

And you can start producing Bitcoin

How does this business make money?

By one word: slow

Or two words: long-term

Once a machine is online,

It needs to run for at least 4 years

Only then will the hardware break or be phased out

So it’s a very long-term endeavor

So how does it beat Beta and earn Alpha?

For example,

On Bitmain’s official site, there’s a model called S21 Pro

The listed price is 16U

No futures, no spot

Where’s the spot?

Datarun has spot stock

The spot cost is about 19.2U per T

The full machine costs about $4,480

The electricity cost over 4 years

Is about $5.9 per day

Over a year, over $2,000

Over 4 years, over $8,000

Adding up the machine and electricity over 4 years,

Total investment is about $13,000

Now, if we use $13,000 to buy Bitcoin,

At the current price of $120,000,

We can only buy about 0.109 BTC

But according to data from Bitmain,

This machine can mine about 0.1675 BTC in 4 years

Even with custodians like Data Run,

After deducting 10% management fee,

You still get about 0.15 BTC

This amount is 38% more than just buying coins directly

This extra part

Is basically the mining outperforming Beta and the market

That’s the Alpha earnings from mining

And all miners know,

Electricity costs are paid gradually

Not paid all at once

So the capital cost is much lower

It can be understood as a installment plan to buy coins

With higher capital utilization

So look,

On the surface, it’s a business

But behind it, it’s all logic

If you’re not making money,

It might be because you fell for a lack of knowledge

So we see that Bitcoin mining

Is one of the few business models in the B circle

That still stands firm today

Many companies have achieved great results through mining

In fact,

Most publicly listed companies in North America’s B circle

Are involved in mining

Even wealthy B circle tycoons

If you ask around,

Most come from mining backgrounds

Currently, the profit in Bitcoin mining

Has decreased due to Bitcoin’s automatic halving mechanism

It’s hard to imagine

How much Alpha the early miners from 10 years ago could have earned

Having summarized these methods of earning Alpha,

Let’s look at this chart again

To briefly summarize,

If you want good returns,

First, look to the right for Beta

The higher the Beta, the higher the steady gains from holding and doing nothing

But the risk also increases accordingly

After all, higher returns always come with higher risks

Those with strong risk management skills

Can boldly move further to the right

But please, move to the left

Once Beta is confirmed,

You can look upward

To find Alpha

The more Alpha you have,

The longer you stay in the upper right corner

The higher your excess returns

As the crypto industry’s compliance further develops,

More assets will enter the blockchain network

And more Alpha + Beta strategies will be combined

We need to incorporate this theoretical framework

Into our radar

Activate our radar to scan this industry

To find real opportunities to earn Alpha

The Stablecoin Big Genius Act has already passed

Followed by the Clear Law Act

Each time a law passes,

It creates a window for Alpha returns

With online cognition and bold information,

We are among the 10% who gain wealth **$COMMON **$MON