Crypto market hot concept rotation analysis: How do the 14 major zones perform in terms of returns?

This year, the overall crypto market is in a state of fluctuation and adjustment, with liquidity continuously tightening. In this environment, some popular concepts and assets have still emerged in the market, with the rotation of concepts linking 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.

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 has reached 26.42%.

2. During the upward rotation, the Social Trading Bot, MEME, and BRC-20 appeared most frequently, followed by LSD/LSDFi and SocialFi, achieving the highest average weekly increase within 4-6 calendar weeks. This creates 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 first upward trend segment lasting an average of 48.43 days, followed by 30.04 days, 20.48 days, and 14.86 days.

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

Overview of 14 Popular Concepts

This analysis selected 14 popular concepts including Hong Kong Web3 concept, NFT/NFTFi, Layer 2, LSD/LSDFi, MEME, Social Trading Bot, appchain/stack, RWA, Wallets, SocialFi, BRC-20, DEX/Perp DEX, Lending/Borrowing, and CEX.

These concepts cover the Hong Kong Web 3 concept stimulated by policy dividends, the LSDFi concept brought by Ethereum upgrades, the BTC-20 concept for the expansion of Bitcoin application scenarios, the social media trading robot concept inspired by ChatGPT, as well as the ever-popular MEME concept and mainstream concepts such as DEX, NFT, and CEX.

From the perspective of listing trading time, only BRC-20 and Social Trading Bot are new concepts that have emerged this year. Among the four popular concepts of Layer2, LSD/LSDFi, MEME, and NFT/NFTFi, there are also some new assets issued this year, indicating that these concepts have been relatively active this year.

Concept Rotation Analysis

From the perspective of the highest average weekly increase in zones, 11 zones have rotated this year. RWA, DEX/Perp DEX, Lending/Borrowing, CEX, and ETH did not make the list, meaning they have not led the increase this year. The leading zones have an average weekly increase of 26.42%.

During the upward rotation, trading robots, MEME, and BRC-20 appeared most frequently, with the highest average weekly increase over 6 and 5 natural weeks, respectively. LSD/LSDFi and SocialFi follow, with the highest average increase over 4 natural weeks. These 5 concepts are the best-performing zones this year's rotation.

In summary, trading bots belong to a highly volatile popular concept, appearing multiple times in the weekly average rise and fall sequence with the highest fluctuations. LSD/LSDFi and SocialFi have relatively smaller fluctuations, appearing more often in the rotation sequence with the highest average gains, which are relatively strong zones. Wallets and NFT/NFTFi, while having highlights, have generally appeared multiple times in the rotation sequence with the highest average losses this year, making them relatively weak zones.

Market Uptrend Analysis

This year, BTC and ETH have exhibited three similar upward trend segments: from January 1 to February 21, from March 11 to April 17, and from June 15 to July 14. The first upward trend was disrupted by external regulation and changes in the financial environment, while the latter two were primarily ended due to liquidity tightening influenced by the Federal Reserve's interest rate hikes.

Analysis of the duration of upward trends reveals that the overall upward trend is gradually weakening. The average duration of the first upward trend segment is 48.43 days, followed by 30.04 days, 20.48 days, and 14.86 days. Some concepts such as CEX, Layer2, and MEME still maintain strong upward potential in the third segment. SocialFi and MEME are extended to 26 days and 18.5 days in the fourth segment due to the influence of certain assets.

For most tokens, the highest return in the first upward trend segment is the highest return of the year, and some new tokens this year have set their highest annual returns in the recent trend segment.

Structural Strategy Comparison

Using BTC as a baseline strategy for holding coins throughout the year, the theoretical return rate is 60.22%.

Consider two types of concept rotation strategies:

1. Weekly Hot Spot: Buy the asset with the highest price increase for the week according to the natural week, with a theoretical return rate of about 2053.20%. However, it is highly sensitive to asset selection, and changing to another asset may result in a return rate dropping to 389.66%.

2. Rotate based on the duration of the upward trend: Buy the asset with the longest upward duration within this cycle, with a theoretical yield of approximately 1536.67%. However, this is mainly due to the surge of BRICK during the fourth upward phase; if only the first three phases are considered, the yield is approximately 44.93%.

Overall, holding BTC may be a strategy with yields at a mid-level. The theoretical returns from chasing weekly hot topics may far exceed the baseline, but are greatly influenced by the selected assets. Participating in an upward trend may be below the baseline, depending on how many segments of the upward trend are participated in.

Understanding the rotation of concepts can focus on the opportunities for new concepts and the re-rotation of past concepts. If one can participate in the rise of a popular concept, it will significantly enhance the theoretical annual return.