Factor Friday - August 14, 2026

Size Leads as Factor Dispersion Collapses

Factor signals were relatively muted this week, with just 2.06 percentage points separating the best factor from the worst—the second-narrowest spread among 2026’s 32 completed Thursday weeks. All seven factors finished within ±1.4%. Size led at +0.69%, while Momentum finished last at -1.37%. Growth (+0.31%), Value (+0.14%), Liquidity (-0.15%), Downside Beta (-1.21%), and the Market (-1.30%) fell between them. Size and Downside Beta are both sign-inverted, so the pair still reads risk-seeking: smaller names beat larger ones and the assets most exposed to drawdowns beat the resilient cohort. Liquidity, also sign-inverted, turned marginally negative and ended the two-week run that led the field a week ago. The Market's -1.30% is its second consecutive negative week and its sixth consecutive weekly decline, stepping down from +5.22% at the start of July, a steady deceleration rather than a break. Over four weeks Growth leads at +2.05%, followed by Liquidity (+1.99%), Size (+1.27%), Momentum (-0.38%), Downside Beta (-2.57%), the Market (-2.86%) and Value (-3.18%); the Market's four-week reading has swung from +3.18% a week ago to negative as July's strong weeks rolled out of the window. Year-to-date, Size (+4.68%) is still the only factor in positive territory, Liquidity (-9.25%) the weakest style factor, Momentum (-8.36%) close behind, and the Market stands at -37.28%. For an allocator the week offered neither direction nor selection worth paying for, and the condition that would change that is a widening of the spread, in either direction, from a base this compressed.

Rolling Factor Rankings and Rotation

Size took the weekly lead for only the third time in 2026, after January 8 and June 4, and at +0.69% it is the second-smallest number to top the table all year, behind only the +0.65% that led the week of January 29. Momentum made the opposite move, completing a full reversal from the two-week leadership it held on July 23 and July 30: +1.96%, then -0.99%, now -1.37% and last of seven, its fifth last-place finish of the year. That round trip is the clearest expression of this year's standing pattern, in which leadership almost never survives contact with a new week. The August month-to-date column now agrees with the weekly ranking rather than contradicting it, with Size on top at +1.54% and Liquidity second at +1.24%, while the Market has slipped to third at +0.66% from the +1.99% that led the column a week ago, and Downside Beta (-3.09%), Momentum (-2.02%) and Value (-1.81%) sit at the bottom. July closed with the Market at +7.09% and Momentum second at +2.02%, so the monthly sequence of Growth in May, Size in June and the Market in July has handed August back to Size while beta fades. The more informative reading this week is not the order but the range. At 2.06 percentage points, top to bottom, the factors are telling an allocator that the cross-section has gone quiet: whatever separated winners from losers in June and early July is not currently operating. Size has now been positive in six of the last eight weeks, the steadiest run in the set, and that consistency rather than this week's magnitude is what carries forward.

Market and Key Factor Betas

Market Beta

Market-beta composition has now gone four consecutive weeks without a single entry or exit at either end, and the beta values themselves moved by hundredths. The high-beta cohort stays anchored by a cross-chain messaging token at 1.79, with liquid staking, meme coins, gaming and layer-2 scaling names, a naming-service token, a modular data-availability token and a high-throughput layer-1 filling out the rest. The defensive end is led by a political DeFi token below 0.70, Bitcoin (BTC) at 0.88, and enterprise interoperability, legacy payment chains and older smart-contract platforms behind it. With the Market at -1.30%, that high-beta concentration cost money for a second week running, and the four-week reading of -2.86% now confirms what the weekly series has been signalling since early July rather than contradicting it. Four weeks of an entirely frozen list through a steady deceleration in returns says positioning in broad beta has not adjusted at all to a market that has stopped paying for it. For a holder of broad-market exposure the risk is that this list only re-sorts after the drawdown, not before it.

Size

Size led the week, and the notable feature of the factor is how little its book had to change to do it. Week-over-week factor scores moved by an average of 0.001 and a maximum of 0.02, with no entries or exits at either end of the beta list, which is what the factor's construction implies: fully diluted market capitalization re-ranks slowly, so a Size return is a statement about how small beat large, not about repositioning. The high size-beta cohort is dominated by meme coins, AI and data-infrastructure tokens, a storage name, an IoT token, digital identity, gaming and metaverse assets, and a cross-chain messaging token, with the top of the list at 4.46. The low end is the large-cap core: Bitcoin (BTC), Ethereum (ETH) and Solana (SOL) alongside major DeFi lending and exchange tokens, a payments chain and an AI infrastructure name that anchors the list at -0.70. At +0.69% this is a small payment for that tilt, but it is the sixth positive week in eight and Size remains the only factor with a positive year at +4.68%. A book tilted toward smaller names has been quietly compensated all summer without ever being spectacularly right, and the risk to that position is a large-cap-led rally, which is the configuration that has historically ended these runs.

Momentum

Momentum was the week's clear loser, and unlike Size it churned heavily to get there. Sixteen of the factor's thirty-two names swapped between the long and short legs, the joint-highest turnover since late June, and the average absolute score move of 0.87 was the largest in ten weeks. A tokenized real-world-asset name and a major meme coin both fell out of the long leg with score declines above 2.0 points, a launchpad token gained 2.08 points, and a scaling token and a digital-identity token crossed from short to long. That is a trend signal being rebuilt from scratch, which is exactly what a choppy tape produces and exactly why the factor did not pay. On the beta list the high-momentum cohort is led by EOS at 2.29, sitting well clear of second place at 1.40 and worth naming because the gap is so wide, followed by digital identity, a perpetuals exchange token, layer-1 platforms, gaming, storage and AI names. The low end holds legacy payment and settlement chains, meme coins and gaming assets, with a launchpad token entering the bottom 10 as a major meme coin exited. Momentum's -8.36% year-to-date is the second-worst of the six style factors, and the read for a trend-following allocation is that the signal is currently unstable rather than merely unprofitable. The condition that would change it is a tape that trends for more than a week at a time.

What Factors are Driving Markets

Factor contributions across the CF DACS Sectors universe total roughly +2.9% over the trailing 30 days while the Sectors index returned -2.5%, leaving the factor sleeve about 5.3 percentage points (pp) ahead of the index. That reverses last week's position, when the index led factors by 2.3 pp, and the flip came from both directions as strong early-July index returns rolled out of the window and factor contributions roughly doubled. Downside Beta led contributions at +1.4%, Size added +0.9% and Growth +0.6%, its first positive contribution to this universe since late June, while Value subtracted -0.2% and Momentum was flat. The weekly tape beneath was again far wider than the index return: Sectors fell 1.5% on the week, but PUMP gained 21.1% and UNI lost 13.2%, roughly 34 points between best and worst across eight constituents. DOGE carries 57.3% of the index and rose 2.1%, contributing +1.2 pp on its own, which was almost exactly offset by UNI's 9.7% weight and double-digit loss. Selection is now carrying this universe while the index return is not, and the watch item is whether Downside Beta and Size hold positive contributions as the window refills.

In the CF DACS Services universe the same reversal is wider still. Factor contributions total approximately +2.3% over the trailing 30 days against a Services index return of -3.1%, putting factors about 5.4 pp ahead of the index, against 2.4 pp a week ago. Size was the largest contributor at +1.2%, Downside Beta added +1.0% and Growth +0.7%, offset by Value at -0.5%, so the sleeve turned positive while the index fell. Constituent behaviour on the week ran the other way to the 30-day picture and was strongly positive: the index rose 5.0%, with LINK up 7.2% on a 49.5% weight for +3.6 pp of that move, WLD adding 12.9% on an 11.2% weight and TAO 5.1% on 16.5%, while RENDER's 5.1% loss was the worst of the eight and moved the index by two tenths of a point. That single-name concentration is why the factor sleeve carries more information here than the headline does, and it is the clearest case this week of factors and index telling genuinely different stories.

The Settlement universe, dominated by Bitcoin, again registered essentially no factor signal. Contributions net to roughly -0.1% over the trailing 30 days, with no individual factor moving more than a few hundredths of a percent, while the Settlement index fell 3.0%, leaving a spread of about 2.9 pp with factors ahead. A week ago the index led factors by 2.8 pp, so this is the third of three universes to flip sign, and the common cause is an index-level drawdown that the factor sleeves did not participate in. Bitcoin (BTC) holds 75.9% of this index and fell 1.6% against an index return of -1.4% on the week, roughly 90% of the move from one constituent. Dispersion in the tail was real but immaterial: ADA fell 10.7% and ALGO 12.6%, yet at 0.52% and 0.03% of the index they moved nothing, while SOL's 4.6% gain on a 3.2% weight was the largest positive contribution. A Settlement allocation therefore remains a directional Bitcoin position in factor terms, and only a change in the index's weight distribution would alter that.

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.