Factor Friday - July 31, 2026

Momentum Holds Leadership as the Market Moves Sideways

For the week ending July 30, the Market gained +0.02%, effectively flat and an end to the four-week rally that carried July. Momentum led the field for a second consecutive week at +1.96%, the first back-to-back style leadership since late May, while Growth reversed sharply to +1.74% after sitting at the bottom of the field for most of the month. Liquidity (+0.84%) and Downside Beta (+0.64%) also turned positive, Size (-1.20%) gave back its recent gains, and Value (-1.93%) fell further into last place for a second week. The four-week window has changed materially: Momentum now leads at +2.54% while the Market has faded to +0.48% from +7.13% a week ago, reversing the dominance that defined the prior month. Year-to-date, Size (+2.86%) remains the only positive style factor though its cushion has narrowed from +4.11%, Liquidity (-10.33%) is the weakest style, and the Market stands at -35.94%. The takeaway for investors is that the the week's return dispersion came almost entirely from style exposure rather than market beta.

Rolling Factor Rankings and Rotation

The quilt chart still shows the Market at the top of the July month-to-date table at +10.11%, more than four times the leading factor, but the weekly increments behind that figure have gone to zero and the month-to-date reading is essentially unchanged from a week ago. The movement is now entirely beneath it. Momentum climbed from +0.40% to +2.37% month-to-date and has taken clear second place, holding the weekly style lead for a second straight week. That is the fourth multi-week leadership run by any style factor in 2026, after Downside Beta's four-week run in February, Size's two weeks in April, and Growth's two weeks in late May, and it is the first since that May run. Growth was the largest improver, lifting its month-to-date reading from -3.43% to -1.76% and vacating the bottom of the table. Value made the opposite move, deteriorating from -0.77% to -2.69% to anchor the month, and Size slipped from roughly flat to -1.24% as its weekly contribution turned negative. Downside Beta (-0.68%) and Liquidity (-0.23%) sit in between. Stepping back, leadership has passed from Growth in May to Size in June to the Market in July at the monthly level, but the weekly data is churn: 31 weeks of 2026 have produced 25 distinct leadership runs, a median run of a single week. Momentum's two weeks is notable against that base rate rather than because two weeks is a long time.

Market and Key Factor Betas

Market Beta

Market-beta composition was unchanged for a second consecutive week, with no entries or exits at either end of the list and only trivial reordering. The high-beta cohort remains concentrated in meme coins, layer-2 and interoperability tokens, and liquid-staking and DeFi names, topped by a cross-chain messaging token whose beta edged up toward 1.83. At the defensive end, a large-cap governance token anchors the bottom below 0.7, Bitcoin sits near 0.88, and enterprise interoperability, older smart-contract and payment chains, and a blue-chip DeFi governance token fill out the low-beta group. With the Market factor returning +0.02%, the high-beta names added nothing this week, and the four-week beta contribution has collapsed to +0.48% from +7.13%. The stability of this list through a stalling rally is itself informative: exposure has not rotated defensively; it has simply stopped being rewarded.

Momentum

The high momentum-beta cohort, the assets most sensitive to recent price persistence, is led by a legacy smart-contract chain at an outlier 2.29, well clear of the rest of the field, followed by AI and digital-identity tokens, a perpetuals exchange token, newer layer-1s, and gaming and storage names. The top 10 saw no entries or exits, though the perpetuals token's momentum beta compressed by nearly 0.3. The low end is populated by payment-focused and enterprise chains alongside meme coins, with a major meme coin entering the bottom 10 as a launchpad token dropped out. Performance is what makes this list matter this week: Momentum returned +1.96% for a second straight week of leadership and now leads the four-week window at +2.54%, ahead of the Market factor's +0.48%. It remains -6.16% year-to-date, so this is a recovery from a deep hole rather than an established trend. Set against a 2026 base rate in which style leadership has usually lasted a single week, two consecutive weeks is the fourth such run this year and the first since late May.

Growth

The high growth-beta cohort, the assets most sensitive to network-adoption trends, is led by a large-cap governance token at 2.59 and clusters in layer-2 scaling tokens, blue-chip DeFi and liquid-staking protocols, and a major payment network. A gaming-focused layer-2 entered the top 10 as a legacy smart-contract chain exited. At the low end, gaming, AI, and IoT tokens sit alongside Bitcoin and a launchpad token whose growth beta rose by more than 0.3, with a perpetuals exchange token entering the bottom 10. The reversal in performance is the story here: Growth returned +1.74% after ranking as the weakest factor across both the four-week and month-to-date windows in recent weeks, and its July month-to-date reading has improved from -3.43% to -1.76%. One week does not confirm that network-adoption narratives are being repriced, and Growth is still the largest single drag on trailing 30-day factor contributions in two of the three CF DACS universes. What has changed is direction, after a month of uninterrupted declines.

What Factors are Driving Markets

Factor contributions across the CF DACS Sectors universe total roughly -2.6% over the trailing 30 days while the Sectors index returned +7.8%, leaving the index about 10.4 percentage points ahead of the factor sleeve. That gap has more than doubled from 4.3 percentage points last week, and it widened from both directions: the index return climbed as the June recovery filled the window, while factor contributions fell further negative. Downside Beta was the only meaningful positive contributor at +0.4%. Growth remained the largest drag at -1.2%, and Size deteriorated from roughly flat to -0.9% as the small-cap premium reversed, with Momentum subtracting -0.7% despite its strong recent weekly returns. The trailing window still carries the earlier weakness in these factors, which is why the weekly reversals in Momentum and Growth have not yet reached the contribution analysis.

In the CF DACS Services universe, factor contributions net to approximately -2.9% over 30 days against a Services index return of +2.6%, a gap of roughly 5.5 percentage points with the index ahead, widened from 2.5 percentage points a week ago. Downside Beta led contributions at +0.3% with Momentum and Liquidity marginally additive. Growth was again the heaviest drag at -1.3%, Size subtracted -1.2% in a sharp deterioration from -0.3% last week, and Value cost -0.7%. Services carries the narrowest factor-versus-index gap of the three universes, but the direction matches: cross-sectional style selection has detracted while broad direction has added.

The Settlement universe, dominated by Bitcoin and core settlement-layer assets, again traded on broad market direction alone. Factor contributions net to essentially zero over the trailing 30 days, with no single factor contributing more than a tenth of a percent in either direction, while the Settlement index rose +7.6%. That leaves a spread of roughly 7.5 percentage points, marginally narrower than the 8.9 points last week and the only one of the three gaps to compress. With Bitcoin setting the pace, style dispersion within this universe remains too small to register.

Appendix: CF Factor Methodology

Market Factor

The market factor captures the broad, systematic risk that permeates the digital asset ecosystem. It reflects aggregate influences such as macroeconomic conditions, investor sentiment, and overall market volatility. As such, this factor is defined by the daily returns of the CF Broad Cap (Free Float Market Cap Weight) Index, offering a comprehensive and capitalization-weighted representation of the asset class.

Size Factor

The size factor captures the return differential associated with asset scale, reflecting the hypothesis that smaller-cap digital assets tend to outperform their larger-cap counterparts. This effect is understood to compensate for elevated operational and financial risks while exploiting potential market inefficiencies. In this framework, the size factor is defined by each asset’s fully diluted market capitalization. The value is sign-inverted so that higher z-scores are assigned to smaller assets and vice-versa.

Value Factor

The value factor reflects a protocol’s ability to generate economic output relative to its capital base and market valuation, combining measures of both efficiency and user engagement. It is constructed as the average z-score of two key ratios: transaction fees relative to total value locked (Fees/TVL) and daily active users relative to market capitalization (DAU/MCap). This composite metric captures how productively a protocol utilizes its resources while also serving as a proxy for user-driven demand. A higher combined score indicates efficient resource utilization and strong user engagement.

Momentum Factor

The momentum factor captures short-term price persistence by identifying assets that have recently exhibited strong performance. It is computed as the average z-score of two metrics: the 2 weeks cumulative performance and the 2 weeks risk-adjusted cumulative performance. This approach aligns with established findings in traditional financial literature and demonstrates empirical relevance in digital assets, where price trends tend to exhibit momentum over short horizons.

Growth Factor

The growth factor captures the expansion of a protocol’s network activity and user adoption. In the context of digital assets, it reflects metrics such as fee generation and user engagement, which serve as indicators of increased platform utilization and operational scale. The factor is defined as the average z-score of 30-day fee growth and 30-day weekly active user growth, thereby identifying assets exhibiting consistent and measurable increases in underlying network usage.

Downside Beta

The downside beta factor captures an asset’s sensitivity to adverse market conditions by isolating its behavior during periods of negative market returns. Empirical evidence shows that assets with lower downside beta tend to outperform their higher-beta counterparts over the long-term, due to their reduced participation in market drawdowns and more stable return profiles during periods of elevated volatility. As such, it is estimated through a regression of the asset’s daily returns over the most recent four-week period against market returns observed exclusively during negative sessions. The resulting value is sign-inverted to ensure that assets with lower downside exposure are assigned higher z-scores.

Liquidity Factor

The liquidity factor captures the ease with which a digital asset can be traded without significantly impacting its price. Empirical evidence shows that illiquid assets tend to command a higher risk premium than their more liquid counterparts, serving as compensation for trading friction and price volatility. To quantify this, the factor is measured using token turnover, defined as trading volume as a percentage of circulating supply. The value is sign-inverted such that higher z-scores are assigned to less liquid assets.

For further detail, view the CF Factors Methodology Document, the CF Factor Data Suite, and Our paper “A Factor Model for Digital Assets” in Springer Nature’s Mathematical Research for Blockchain Economy