Research ·
If altcoins just follow Bitcoin, why hold four of them?
They mostly do: 77% of 4-hour candles move with BTC. But holding fewer coins cut returns to 19–37% a year, and one stop-loss would cost 2–3 times more.
A fair challenge: if SOL, ETH and LINK mostly move with Bitcoin, then holding four of them long is really one bet placed four times, with four sets of orders and fees. Why not hold just the strongest one?
How much of an altcoin is just Bitcoin?
Daily returns, January 2021 to September 2026:
- The average correlation between any two of the ten coins is 0.57. BTC and ETH are the closest at 0.81; DOGE is the loosest at 0.39 against BTC.
- 77% of 4-hour candles move in the same direction as Bitcoin's.
- The 60-day BTC–ETH correlation never fell below 0.61.
So yes: roughly 60–80% of each altcoin position is the Bitcoin bet again. The rest is the coin's own story: SOL in 2023, DOGE in 2021.
What happens if we act on it
| Setup | Return / year | Worst drop | Orders per cycle | One stop-loss costs |
|---|---|---|---|---|
| Only the strongest coin, 50% of the account | 18.9% | −12.5% | 0.09 | 14% |
| 2 coins, up to 50% each | 37.3% | −15.0% | 0.17 | 13% |
| 3 coins, up to 33% each | 44.0% | −18.1% | 0.25 | 9% |
| 4 coins, up to 25% each (live) | 47.0% | −18.5% | 0.31 | 7% |
| 4 coins, skipping any coin more than 0.8 correlated with one we hold | 22.7% | −8.5% | 0.20 | 6% |
Why we kept four
Fewer coins lose a lot of return. The "strongest" coin at entry is often not the one that runs furthest. The coin-specific part of each trend is where the extra return comes from.
The portfolio is already sized as one bet. The 20% volatility target measures the swings of the whole portfolio, correlation included. Four correlated coins are not four times the risk; they're the same total risk spread over four names. That's why the worst drop is about the same with three coins or four.
Spreading caps the damage of one stop-loss. With four coins at 25%, one stop costs about 7% of the account. Put the same exposure in one coin and one stop costs up to 25%.
The correlation filter is a choice, not an improvement. It halves the worst drop and the orders, and it halves the return too. Risk-adjusted it's about the same. We may offer it one day as a calmer option; for now, the bot keeps four coins.