Crypto Market Hotspot Rotation Analysis: A Panorama of Returns from 14 Mainstream Concept Zones

This year, the overall crypto market is in a state of fluctuation and adjustment, with liquidity continuing to tighten. Against this backdrop, some popular concepts and assets have still emerged in the market, and the rotation of these concepts has connected this year's market trends. In the absence of a long-term upward trend, chasing the rotation of different concepts may capture structural opportunities in the fluctuating market, achieving excess returns.

An in-depth analysis of price changes for 114 assets across 14 concepts shows that:

1. The 32 calendar weeks that have passed this year have formed 11 concept rotations, including LSD/LSDFi, Appchain/stack, NFT/NFTFi, SocialFi, Layer2, MEME, Social Trading Bot, BTC, Hong Kong web3 concept, Wallets, and BRC-20. The average weekly increase of the leading concepts in each rotation reached 26.42%.

2. In the upward rotation, Social Trading Bot, MEME, and BRC-20 appeared the most, followed by LSD/LSDFi and SocialFi, which achieved the highest average weekly growth over 4-6 natural weeks. This provides market participants with the possibility to capture structural opportunities.

3. This year, the overall market has shown three similar upward trend segments, and the performance of most popular conceptual assets is similar. The overall upward trend has gradually weakened, with the average duration of the first upward trend segment being 48.43 days, followed by average durations of 30.04 days, 20.48 days, and 14.86 days in the subsequent upward trend segments.

4. Comparing different strategies, holding BTC may be an investment strategy with average returns. If one can accurately grasp each hotspot, the theoretical return this year could reach 20 times.

Overview of 14 Popular Concepts

Based on this year's media reports on popular events and asset classification, a total of 14 popular concepts have been selected: Hong Kong Web3, NFT/NFTFi, Layer 2, LSD/LSDFi, MEME, Social Trading Bot, appchain/stack, RWA, Wallets, SocialFi, BRC-20, DEX/Perp DEX, Lending/Borrowing, CEX.

These concepts encompass the policy dividend stimulus in Hong Kong Web3, LSDFi brought about by Ethereum upgrades, BTC-20 for the expansion of Bitcoin application scenarios, social media trading bots inspired by ChatGPT, as well as the ever-popular mainstream concepts such as MEME, DEX, NFT, and CEX.

From the observation of the listing time of assets, only BRC-20 and Social Trading Bot are new concepts that emerged this year, and the selected assets were all issued this year. BRC-20 mainly rose and became popular from May to July, while trading bots mainly rose and became popular from July to August. Among the four popular concepts of Layer2, LSD/LSDFi, MEME, and NFT/NFTFi, some new assets issued this year have also entered the observation list, indicating that these concepts have performed relatively actively this year.

Concept Rotation Upward Analysis

A statistical analysis of the price changes of each concept within every natural week this year found that:

Overall, the average weekly increase of the 14 concepts before mid-May showed no significant differentiation, while after mid-May, several concepts began to show a notable upward trend, with a significant increase on a weekly basis. For example, in the week of May 14, the average weekly increase of the MEME concept reached 979.65%, setting a record for the highest weekly increase of a single concept this year.

Other notable increases include: the average increase of 202.97% in the Hong Kong Web3 concept for the week of May 14; an average increase of 99.86% in the LSD/LSDFi concept for the week of May 21; an average increase of 187.89% in the trading robot concept for the week of May 28; an average increase of 114.79% in the Hong Kong Web3 concept for the week of July 2; average increases of 173.69% and 137.26% in the trading robot and SocialFi concepts respectively for the week of July 23; and an average increase of 174.21% in the SocialFi concept for the week of August 13.

From the perspective of the weekly average increase of the highest concepts, 11 concepts have rotated this year. RWA, DEX/Perp DEX, Lending/Borrowing, CEX, and ETH have not made the list, meaning they have not led the rise this year. The average increase of the leading concepts reaches 26.42%( median).

During the rotation process of price increases, trading robots, MEME, and BRC-20 appeared most frequently, with the highest average weekly increase over 6 and 5 calendar weeks respectively. Next, LSD/LSDFi and SocialFi had the highest average increase over 4 calendar weeks. These five concepts performed the best in this year's rotation, while other concepts appeared only 1-2 times during the upward rotation.

Overall, trading robots belong to a popular concept with significant volatility, frequently appearing in the rotation sequences with the highest average price fluctuations. LSD/LSDFi and SocialFi have relatively smaller volatility, appearing more often in the rotation sequences with the highest average price increases, indicating they are relatively strong zones. Wallets and NFT/NFTFi generally appear more frequently in the rotation sequences with the highest average price decreases, indicating they are relatively weak zones.

Main Upward Trend Analysis

Looking at a longer time frame, this year BTC and ETH have shown three similar upward trend segments: the first from January 1 to February 21, the second from March 11 to April 17, and the third from June 15 to July 14.

The main factors breaking the first upward trend are external regulations and changes in the financial environment, such as the crackdown on Paxos by U.S. regulators, the classification of NFTs potentially falling under securities definitions, and the USDC de-pegging crisis. The main factors breaking the second and third upward trends are the continuous tightening of liquidity and the lack of new strong narratives within the industry.

Analysis of the upward duration of various concept tokens reveals a gradual weakening of the overall upward trend. The average duration in the first upward trend segment for each concept is 48.43 days, while the average durations in subsequent upward trend segments are 30.04 days, 20.48 days, and 14.86 days respectively.

Some concepts are slightly different, such as CEX, Layer2, and MEME concepts, which maintain a strong upward capacity in the third upward trend segment, with an average duration longer than the previous phase. SocialFi and MEME concepts, influenced by individual assets, have their upward duration extended to 26 days and 18.5 days in the fourth upward trend segment.

For most tokens, the highest profit during the first major upward trend period is the highest profit of the year, and some new tokens launched this year have recorded their highest profit during the recent trend period.

Structural Strategy Comparison

Taking the BTC annual holding strategy as the baseline strategy, the theoretical return rate is 60.22%.

Consider two concept rotation-based strategies:

1. Weekly trend chasing: Buy the asset with the highest weekly increase in a natural week, buy on Wednesday, and sell on Sunday. This strategy has a theoretical return rate of approximately 2053.20%, but it is highly sensitive to the selected assets.

2. Rotate assets based on the duration of the uptrend: reduce trading frequency, buy 3 days after the uptrend begins, and sell 3 days after the uptrend ends. This strategy has a theoretical return of approximately 1536.67%, primarily benefiting from the surge of BRICK during the fourth uptrend segment. If only the first three uptrend segments are considered, the return is approximately 44.93%.

Overall, holding BTC may be a strategy with a median level of return. The theoretical return from chasing weekly hot topics may be significantly higher than the baseline strategy, but the return is greatly influenced by the selected assets. Participating in the market based on the duration of upward trends may yield a theoretical return lower than the baseline strategy, mainly depending on how many segments of upward trends were participated in.

In addition to focusing on new concepts and tokens, grasping the concept rotation can also involve paying attention to the opportunities for previously popular concepts to rotate again. If one can participate in the rise of one of these hot concepts, it will significantly enhance the theoretical return on investment for the entire year.