Factor Friday - August 28, 2026

Size Factor Leads As The Market Moves Higher

The Market rallied +11.2% during the 7-days ending August 27, 2026, a second straight weekly gain that ran at roughly two thirds of the prior week's +16.2% pace. Size led the style factors at +3.2%, its best week since early June and a full reversal from last week's -1.5% loss, while Liquidity followed at +1.7% for a third consecutive positive week. Value reversed hard to -3.5% from a flat -0.3%, Momentum eased to -1.1%, Growth held near flat at -0.3%, and Downside Beta remained the weakest style factor, deepening to -4.6% from -2.2%. Size and Downside Beta are both sign-inverted, so the pairing describes the same trade from two sides: smaller assets and higher-downside-risk assets both outperformed their opposites, a risk-on signal that reached further down the market cap curve than last week's large-cap-led bounce. Over four weeks the Market is +28.1%, with Liquidity (+4.7%) and Size (+3.0%) the only style factors also positive across that span; year-to-date, Size at +6.6% remains the sole style factor above zero and the Market stands at -19.1%.

Rolling Factor Rankings and Rotation

A narrower spread capped the Market's second straight week at the top: its +11.2% gain and Downside Beta's -4.6% loss left 15.8 percentage points between first and last, down from 18.3 points a week earlier when the same two factors held the same places. Size supplied the week's clearest rotation, jumping from sixth of seven at -1.5% to second at +3.2%, a 4.7 percentage point swing that is the sharpest single-week reversal for the factor since early June. Value moved the opposite way, sliding from third at -0.3% to sixth at -3.5%. The month-to-date ranking now has the Market first at +29.9%, Liquidity second at +5.5% and Size third at +3.4%, while Value has slipped to sixth at -5.8% and Downside Beta stays last at -9.4%. That ordering, a genuine cap-curve rotation into Size alongside a still-negative Downside Beta, signals broadening participation without a defensive bid. Size has now been positive in seven of the last ten weeks, the steadiest run among the style factors.

Market and Key Factor Betas

Market Beta

Market-beta composition has now gone unchanged for a sixth straight week, with the same ten names anchoring both ends of the list since July 23. LDO again leads at 1.62, but ZRO slipped from second to fourth as PENGU and PEPE both moved ahead of it; the cohort stays concentrated in liquid staking, cross-chain messaging, meme coins, gaming, naming-service, modular data-availability and scaling exposures. The defensive end is just as static, led by WLFI below 0.69 and Bitcoin (BTC) at 0.89, followed by enterprise interoperability, legacy payment chains and older smart-contract platforms. A frozen roster through both a six-week Market decline and now a two-week rebound says positioning in broad beta has not adjusted to either direction; the same book that lagged the drawdown is now capturing the recovery. For a holder of broad-market exposure, the risk sits on both sides: this cohort will amplify the next leg, whichever way the Market moves.

Size

Size led the non-market factors this week, reversing from last week's bottom-of-the-table finish to +3.2%, and the composition confirms this was a price move rather than a repositioning: week-over-week factor scores for the portfolio barely shifted, with the largest swing, in XRP, at just -0.06 points, in keeping with a factor built on fully diluted market capitalization that re-ranks slowly. The high size-beta cohort is unchanged from last week: meme coins, AI and data-infrastructure tokens, a storage name, an IoT token, gaming and metaverse assets, and a cross-chain messaging token, topped by WIF at 4.46, with ZRO nearly catching FET for second. The low end saw the real movement: Sui (SUI) and Avalanche (AVAX) newly joined Bitcoin (BTC), Ethereum (ETH) and Solana (SOL) among the ten lowest size betas, displacing AAVE and BCH, leaving the large-cap cohort even more crowded at the low end of the size spectrum this week. Size has been positive in seven of the last ten weeks and remains the only style factor positive year-to-date at +6.6%. That patience is being paid only modestly for now, and the position's clearest vulnerability is a large-cap-led leg of the current rally, the same setup that erased the factor's early-June high within a week.

Value

Value reversed hardest of the six style factors, falling to -3.5% from a flat -0.3% and dropping three places in the weekly ranking. Filecoin (FIL) took over the top of the beta list from PUMP as the two swapped places, while Hyperliquid (HYPE) and Uniswap (UNI) both eased, HYPE from 1.70 to 1.45 and UNI from 1.61 to 1.33; the high-value cohort otherwise stayed the familiar mix of storage, prediction-market, oracle-network, layer-1 and DeFi-lending names. At the other end, MKR became the deepest negative exposure as ZRO's own beta improved from -1.09 to -0.42, still in the bottom ten but no longer its anchor; ENA, BCH and XRP entered the list while HBAR, ALGO and SHIB dropped out, a fuller turnover than the top of the list saw this week. The more forward-looking signal sits outside the beta list: Avalanche (AVAX)'s value factor score jumped 2.05 points week over week, the largest swing across any Value constituent, moving it further into long-value territory even before its slower-moving regression beta reflects the change, and Hyperliquid's own score rose 1.17 points in the same direction. A negative print with two of its constituents gaining conviction under the surface reads as a factor whose price outcome and whose positioning are, for now, pointing different ways; the following week's beta list is the place to check whether that conviction shows up in price.

What Factors are Driving Markets

Factor contributions across the CF DACS Sectors universe total +8.3% over the trailing 30 days, against an index return of +27.8%, leaving the index 19.5 percentage points (pp) ahead of the factor sleeve, more than four times the 4.3 pp gap a week earlier. Downside Beta remains the largest single contributor at +6.0%, with Liquidity (+1.6%) and Size (+1.5%) adding smaller amounts, while Growth (-0.9%) was the largest drag. The widening gap means the systematic style basket is explaining a shrinking share of a fast-accelerating rally; direction, not factor selection, is doing almost all the work. At the token level the move was far from even: Ethena (ENA) returned +55.2% on the week against the index's +16.2%, and Aave (AAVE) added +32.4%, while Ondo (ONDO) lagged at +7.9%, nearly 8.3 pp behind the index. A single outlier is again carrying a category-level number, and the read for allocators is that Sectors exposure right now is a bet on continued direction and a handful of idiosyncratic movers, rather than a bet on the factor tilt.

In the CF DACS Services universe, factor contributions total +2.3% against an index return of +35.9%, a 33.6 pp advantage for the index that is more than three times the 9.9 pp gap of a week ago, the widest of the three categories both this week and last. Downside Beta again contributed the most at +3.6%, while Value (-1.7%) and Liquidity (-0.6%) were the largest drags. Services has therefore extended its run as an index-led category rather than a factor-led one. At the constituent level, Zero (ZRO) led with a +37.8% weekly return against the index's +14.4%, and Polygon (POL) added +32.5%, while Filecoin (FIL) was the lone laggard at -2.0%, the only constituent across all three categories to post a negative print this week. Services exposure is currently a wager on the category's broad direction and on a small set of names running well ahead of it, with the factor sleeve contributing little of the explanation either way.

The Settlement universe carries the clearest index-level signal of the three. Factor contributions are effectively flat at -0.2% over the trailing 30 days, while the index returned +28.0%, a 28.1 pp gap in the index's favor that has more than doubled from 11.5 pp a week earlier. No individual factor contributed more than three hundredths of a percent in either direction, so this month's advance sits almost entirely outside the systematic style basket. Solana (SOL) led the category's constituents at +25.0% against the index's +11.1%, with Bitcoin Cash (BCH) close behind at +22.1%, while ICP lagged at +3.8%, roughly 7.3 pp behind the index. Settlement is participating fully in the broader rally without any factor doing measurable work to explain it, and that gap is now wide enough that a reversal in the Market would be the cleanest test of whether direction alone has been carrying this category.

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.