Relative Rotation Graphs (RRG) are very useful visual tools to identify how an instrument or a sector is performing against a benchmark. The RRG image below shows eleven customized crypto indices. Each contains the top ten by market cap (excluding stablecoins).
The indices are Altcoins, DeFi, Decentralized Exchanges, Metaverse, Play-To-Earn, Proof-Of-Work, Privacy, Smart Contracts, Top 10 Market Cap, and Yield Farming.
Without going into the nitty-gritty details, the four colored sectors can be thought of like this, so imagine you’re in a race:
- Leading Quadrant (green) – You are in 1st, 2nd, or 3rd place. You are leading the pack. You’re going to medal. Anthems will be sung, tears will fall, and you may or may not pass a doping test.
- Weakening Quadrant (yellow) – You’re losing your momentum; you’re out of breath. You just realized that your spouse or your mom didn’t show up to watch you, sapping your enthusiasm. You’re falling back and in the middle of the pack.
- Lagging Quadrant (red) – You pulled a hamstring. You pulled a Michael Scott and ate five pounds of fettuccine alfredo an hour before your race. You fell down. You’re dead last. No anthems will be sung, but tears will fall, and no one will remember your name.
- Improving Quadrant (blue) – You see your spouse or your mom in the stands. The crowd starts to see you get up. Emotional music begins, and the camera pans to the crowd standing in slow motion. You’re back on your feet and back in the middle of the pack, gaining on the leaders.
So, who sucks, who is losing and who is winning? Let’s look.
OMG You Suck: Play-To-Earn Index
Play-To-Earn examples: Decentraland ($MANA.X), The Sandbox ($SAND.X), Axie Infinity ($AXS.X)
So, technically, the Play-To-Earn Index should be near the top of the list for a winner based on its position in the Improving Quadrant. However, that wouldn’t be an accurate description of what’s happened to Play-To-Earn.
Using the same race analogy, the Play-To-Earn Index is like this unfortunate racer who face-planted at the start and took a few steps to face-plant again.
Play-To-Earn hasn’t even finished the race yet to know how bad it is doing.
Loooooser: Metaverse Index
Metaverse examples: ApeCoin ($APE.X), Internet Computer ($ICP.X), Theta Network ($THETA.X)
A sausage mascot race where the last sausage falls flat on his sausagey face best sums up the weakest crypto index. The way that the metaverse, in general, is working out, this sausage is the one no one wants because it got left on the stove too long and is more charcoal than sausage.
The Metaverse Index may be the loser here, but the DEX, POS, and Smart Contract Indices are not far behind.
Winning: DeFi Index
DeFi examples: UniSwap ($UNI.X), Avalanche ($AVAX.X), Chainlink ($LINK.X)
The best way to describe the DeFi Index getting the lead here is to remember Australia’s Steven Bradbury’s Olympic gold medal in speed skating at the 2002 Winter Olympics. Basically, everyone else crashed, and he was the last dude still skating and won.
That is essentially what the DeFi Index has done. 💲