Rotation Within CoinDesk Market Index Sectors Bears Similarities to Tradfi Trend

As investors in crypto and traditional finance alike run for cover, one form of analysis finds that bitcoin and health care stocks fit in the same risk bucket.

AccessTimeIconDec 20, 2022 at 7:43 p.m. UTC
Updated Dec 20, 2022 at 9:07 p.m. UTC

Money is searching for quality in both traditional and digital assets, as investors appear to favor safety above all for right now.

CoinDesk Indices (CDI) data shows the Currency Select Index (CCYS), anchored by bitcoin (BTC), and the Smart Contract Platform Index (SCPX), anchored by ether (ETH), outperforming other select sectors within the CMI universe.

CMI sectors represent comprehensive groupings of digital assets by sector, allowing for measurement of performance and a comparison.

What today’s data shows is that, similar to in past market cycles, flights to safety within the cryptosphere is translating to movement of capital into BTC and ETH, relative to other coins.

On the other end of the spectrum, the more speculative Computing Index (CPU) and Culture & Entertainment (CNE) have lagged other sectors in both week to date and month to date performance.

CoinDesk Indices 12/20/22 (Coindesk)
CoinDesk Indices 12/20/22 (Coindesk)

The rotation of capital from perceived risk to perceived safety in crypto markets is occurring in conjunction with similar flows within traditional finance.

Relative Rotation Graphs (RRG), a tool developed by Julius de Kempanaer, allows for assets to be tracked versus a selected benchmark. Assets are subsequently separated into four distinct quadrants.

  1. Leading: High relative performance and momentum
  2. Weakening: Strong relative performance and slowing momentum
  3. Lagging: Weak relative performance and momentum
  4. Improving: Weak relative performance but increasing momentum

We compared the following seven SPDR exchange-traded funds (ETF) using the S&P 500 as the benchmark.

  1. XLE: Energy Select
  2. XLY: Consumer Discretionary
  3. XLF: Financials
  4. XLV: Healthcare
  5. XLU: Utilities
  6. XLP: Consumer Staples
  7. XLK: Technology

Defensive sectors such as consumer staples, health care and utilities lead the S&P 500 currently. The more speculative consumer discretionary and technology sectors are lagging and weakening versus the benchmark.

The similar behavior among investors in the two asset classes implies that everyone is choosing safety at the moment.

For those who prefer traditional equities, that translates to utilities, health care and consumer staples. For those who prefer traditional assets, the assets of choice are bitcoin and ether.

Interestingly, adding bitcoin and ether to the same RRG shows that they both fall into the leading quadrant as well.

This appears counterintuitive, as you would be hard-pressed to find someone who would place cryptocurrencies within the same risk bucket as health-care stocks.

But the landscape of markets is ever-changing. And in today’s environment, investors looking for safety in both crypto and traditional equities have landed within the same area.

Relative Rotation Graph (Optuma)
Relative Rotation Graph (Optuma)


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Glenn Williams

Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX