A Feast of Liquidity: How do popular concepts in the encryption market rotate, and what are the benefits of the 14 mainstream sectors?

By Carol, PANews

Affected by changes in external regulatory policies and monetary policies, the overall encryption market is in a state of shock and adjustment this year, and liquidity continues to tighten. Against this background, some hot concepts and hot assets still emerged in the market, and the rotation of these concepts connected the market trend this year. In the absence of a long-term upward trend, it is possible to seize the structural opportunities in the volatile market and achieve excess returns by chasing the rotation of different concepts.

Which concepts have risen this year? Which concepts have not risen yet? Which concepts appear the most frequently among rising concepts? What is the theoretical rate of return that structured investment opportunities can bring? The data column PAData under PANews selected 114 assets of 14 concepts and conducted an in-depth analysis of their price changes. The results show that:

1. Judging from the concept of the highest average weekly increase, the 32 natural weeks that have passed this year have formed LSD/LSDFi, Appchain/stack, NFT/NFTFi, SocialFi, Layer2, MEME, Social Trading Bot, BTC, Hong Kong web3 Concept, Wallets, and BRC-20 are 11 concepts in rotation, and the concept that each rotation leads the rise has an average weekly increase of 26.42%.
2. The repetition of different popular concepts in the rotation rising sequence provides the possibility for market participants to capture structural opportunities. During the rising rotation process, Social Trading Bot, MEME and BRC-20 appeared the most times, followed by LSD/LSDFi and SocialFi achieved the highest average weekly gains within 4-6 natural weeks respectively.
3. This year, the market has gone out of three similar upward trend segments, and the trend of most popular concept assets is similar to them. An analysis of the duration of the upward trend shows that the overall upward trend weakens sequentially, and one of the concepts is in the first upward trend segment The average duration of days in the period is 48.43 days, and the average duration of days in the uptrend segment after that is 30.04 days, 20.48 days and 14.86 days respectively.
4. In the case of concept rotation, comparing different strategies, it is found that holding BTC is likely to be an investment strategy with an intermediate rate of return. If you can accurately grasp each hot spot, the theoretical return this year can reach 20 times.

14 popular concepts are popular this year, BRC-20 and trading robots are new concepts

Referring to the popular events publicly reported by the media this year, and the classification of asset classes by CoinGecko and Dune Analytics (@cryptokoryo), PANews selected Hong Kong Web3 concept, NFT/NFTFi, Layer 2, LSD/LSDFi, MEME, Social Trading Bot, 14 popular concepts such as appchain/stack, RWA, Wallets, SocialFi, BRC-20, DEX/Perp DEX, Lending/Borrowing, and CEX.

These concepts include the concept of Hong Kong Web 3 stimulated by policy dividends, the concept of LSDFi brought about by the upgrade of Ethereum, the concept of BTC-20 due to the expansion of Bitcoin application scenarios, the concept of social media trading robots inspired by ChatGPT, There are also the ever-popular MEME concept and past mainstream concepts such as DEX, NFT, and CEX.

Next, 5-15 assets were comprehensively selected in each concept according to market capitalization and market volume, with additional consideration of mainstream assets BTC and ETH, and finally selected 114 popular assets for this analysis as observation samples. Some of these assets may belong to two or more popular concepts.

Judging from the listing and trading time of the assets selected for observation, only BRC-20 and Social Trading Bot (trading robot) are new concepts emerging this year, and the assets selected for observation are also new assets issued this year, of which BRC-20 It mainly emerged and became popular around May to July this year, and trading robots mainly emerged and became popular around July to August this year. In addition, among the four popular concepts of Layer2, LSD/LSDFi, MEME, and NFT/NFTFi, some new assets issued this year have also entered the watch list, which means that these concepts are more active this year than the previous mainstream concepts.

Tokens of different concepts rose in rotation, and the three concepts of trading robots, MEME, and BRC-20 had the highest increase for many times

Which concepts have risen this year? What are the concepts that have risen the most? In this regard, PANews divides the time period according to the natural week from Monday to Sunday, and counts the price changes of all assets of different concepts in each natural week of this year.

First of all, on the whole, before mid-May, the average weekly growth rate of the 14 concepts did not diverge significantly, but after mid-May, many concepts began to show a significant upward trend, and it took a natural week as a cycle The sharp rise in the figure is manifested as an obvious triangular bulge. For example, in the week of May 14 (the week is referred to by the Sunday of the week, such as the week of May 14 refers to May 8 to May 14), the average weekly increase of the MEME concept reached 979.65%, far Much higher than other concepts, and set a record for the highest weekly increase of a single concept this year. But this was mainly affected by the sharp price increase when LADYS was first listed that week.

Several other obvious highlights include the average increase of the concept of Web3 in Hong Kong in the week of May 14 was 202.97%; the average increase of the concept of LSD/LSDFi in the week of May 21 was 99.86%; The increase was 187.89%; the average increase of the concept of Web3 in Hong Kong in the week of July 2 was 114.79%; the average increase of trading robots and SocialFi concepts in the week of July 23 was 173.69% and 137.26% respectively; The increase was 174.21%. It can be clearly seen that different concepts have rotated and risen at different times this year.

In order to more clearly show the rotation of different concepts throughout the year, PANews further selected the concept with the highest average increase and the concept with the lowest average increase in each natural week. The past 32 natural weeks have formed a rotation of 11 concepts: LSD/LSDFi, Appchain/stack, NFT/NFTFi, SocialFi, Layer2, MEME, Social Trading Bot, BTC, Hong Kong web3 concept, Wallets and BRC-20. RWA, DEX/Perp DEX, Lending/Borrowing, CEX, and ETH are not on the list, that is, they have not led the rise this year. The average weekly increase of the concepts led by various rounds this year reached 26.42% (median).

From the perspective of the concept with the highest average weekly decline, only CEX and Layer2 have not appeared in it this year, and the rest of the concepts have more or less become the concepts with the highest average decline in a certain week. The concepts with the highest weekly average declines reached an average weekly decline of 10.22% (median).

During the upward rotation process, trading robots, MEME and BRC-20 appeared the most times, that is, within 6 natural weeks and 5 natural weeks respectively, the average weekly increase of these concepts was the highest. Secondly, LSD/LSDFi and SocialFi also have the highest average increase in 4 natural weeks this year. The above 5 concepts are the concepts that performed best in this year's rotation, while other concepts only appeared 1-2 times in the rotation.

During the rotation process of decline, the number of trading robots appeared the most, and the average decline in the 7 natural weeks was the highest. Secondly, Wallets, NFT/NFTFi, and BRC-20 also have the highest average decline within 3-4 natural weeks, while other concepts have the highest average decline within 1-2 natural weeks.

On the whole, trading robots are a popular concept with relatively intense fluctuations, taking the natural week as the time period, and appearing in the rotation sequence with the highest average increase and the highest average decrease many times at the same time. On the other hand, LSD/LSDFi and SocialFi fluctuate relatively less, appear more often in the rotation sequence with the highest average increase, and belong to relatively strong sectors. In addition, although some assets in Wallets and NFT/NFTFi have performed well, in general, these two concepts have appeared more times in the rotation sequence with the highest average decline this year, and they belong to relatively weak sectors.

The repetition of different popular concepts in the rotation rising sequence provides the possibility for market participants to capture structural opportunities.

This year has gone out of three major upward trend segments, and the rise at the beginning of the year lasted for a long time and the increase was high

If the analysis is not based on the natural week as the time period, but the trading time is prolonged, the trading frequency is reduced, and the upward trend is used as the analysis period, then the situation is different.

The criteria for judging the uptrend segment are a period of overall rise of more than 7 days. The starting point is the time when the recent price is the lowest point and the end point is the time when the recent price is the highest point. During this period, there may be a short-term downward trend, but the time does not exceed 7 days, and Prices are not new lows.

According to this basic standard, the two mainstream assets of BTC and ETH have gone out of three similar upward trend periods this year. The first upward trend period is approximately from January 1st to February 21st, and the second upward trend period Roughly between March 11th and April 17th, the third uptrend period is roughly between June 15th and July 14th. Among them, the main force to break the first upward trend comes from changes in the external regulatory environment and financial environment. Key events such as the US SEC and other regulatory agencies have attacked Paxos back and forth; the latest ruling by the US Federal District Court believes that NFT may meet the definition of securities; USDC is facing an anchor crisis and so on. For some assets in strong sectors, these changes are a break, but for some assets in weak sectors, these changes are a turning point. The main force breaking the second and third upward trends mainly comes from changes in the financial environment. Against the background of the Fed’s continuous interest rate hikes, liquidity continues to tighten, and there are no new narratives emerging within the industry or new narratives are in the early stages, bringing The amount of funds is limited, and the upside is weak and turned to adjustment. Both BTC and ETH are in the adjustment stage recently, but some new concepts have emerged. The recent upward trend segment of these tokens can be summarized as the fourth upward trend segment.

The upward trend division of all concept tokens is standardized and classified according to the upward trend segment of BTC and ETH (the upward trend segment of the market). It is considered to be in sync with the third uptrend segment of the broader market, but it did not experience the first two uptrend segments of the broader market. This division is not absolute. The rising trend of some conceptual tokens straddled the upward trend of several large markets, such as MX in CEX. The rise from the beginning of the year lasted for 109 days (until June 4). It is equivalent to straddling the first and second upward trend segments, and it is included in the first upward trend segment in statistics.

An analysis of the duration of the upward trend shows that the overall upward trend weakens sequentially. The average duration of a concept in the first upward trend segment is 48.43 days, and the average duration of the subsequent upward trend segment is 30.04 days and 20.48 days respectively. and 14.86 days. The upward trend of some concepts is slightly different from that of the whole. For example, the concepts of CEX, Layer2, and MEME still maintain considerable upward momentum in the third upward trend segment, and the average duration is longer than the previous stage; the concepts of SocialFi and MEME Affected by individual assets in the fourth upward trend segment, the rising duration was extended to 26 days and 18.5 days respectively.

And for most tokens, the highest return during the first upward trend period of the market is the highest return for the year, and some new tokens released this year have the highest return for the year during the latest trend period.

Comparison of the three structural strategies, the theoretical rate of return of weekly pursuit of hot spots may be much higher than the baseline strategy

So if you want to pursue the concept of rotation, what strategies can you adopt to achieve higher returns?

Firstly, the BTC annual currency holding strategy is determined as a simple baseline strategy, and the theoretical rate of return of this strategy is 60.22%.

Next, based on the above analysis, two strategies based on concept rotation will be considered, and their theoretical returns will be simply calculated. Asset allocation and risk hedging are not considered here, and only a simple comparison of the theoretical returns brought by different trading strategies does not constitute any investment advice, but only provides a reference for understanding market changes. Both strategies use the principal of $10,000 as the initial total assets to calculate compound interest.

The first strategy based on concept rotation is to chase hot spots every week, and buy the assets with the highest gains in the week according to the time changes of the natural week. Assume that the first two days of each week are the observation time, and the buying time is the natural week. On Wednesday, the selling time is the Sunday of the natural week, and the purchased asset is randomly selected from one of the asset classes with the highest increase in the week. According to this strategy, the return rate is about 2053.20%. However, this strategy is highly sensitive to the selected assets. For example, if the asset in the week of July 23 is changed from UNIBOT to PAAL, then the rate of return of this strategy will drop to 389.66%.

The second strategy based on concept rotation is to reduce the trading frequency and rotate assets according to the theme with the longest duration of the upward trend. Assuming that there are 3 days of observation time for both buying and selling, the buying time is 3 days after the upward trend begins. days, the selling time is 3 days after the end of the upward trend, and the purchased asset is randomly selected from one of the asset classes with the longest rising duration in this cycle. There may be a short position period for buying between different trend segments. Click here The rate of return of the strategy is about 1536.67%, but this is only due to the fact that the asset BRICK was selected in the fourth upward trend segment from the end of July to the beginning of August. Affected by its surge, the rate of return of this strategy has surged, but If the fourth uptrend segment is not considered, and only the first three uptrend segments are considered, then the rate of return of this strategy is about 44.93%.

On the whole, holding BTC is likely to be an investment strategy with an intermediate rate of return. If you follow hot topics every week, the theoretical rate of return may be much higher than the baseline strategy, but the level of return is greatly affected by the selected assets, so the theoretical benefit range of this strategy is also very large. Participating in the market at a lower trading frequency according to the duration of the uptrend may produce a lower theoretical rate of return than the baseline strategy, depending on how many uptrends have been involved.

Different understandings of concept rotation may lead to huge differences in final returns, but in general, if you can participate in the rise of one of the popular concepts, it will significantly increase the theoretical return on investment for the whole year. To grasp the concept rotation, in addition to focusing on emerging concepts and tokens, you can also pay attention to the opportunities for previous concepts to rotate again.