Ecosystem-Relative Strength

THE CALCULATION is unchanged from the equity case: 30-day return minus the benchmark's 30-day return, ranked across assets. What differs, and what is worth an entire lesson, is choosing what to measure against.

WHY BENCHMARK CHOICE IS THE WHOLE PROBLEM HERE. In equities the answer is settled: a stock belongs to a sector by an established classification, and a sector index exists. Crypto has no equivalent consensus taxonomy. Is a Layer-1 chain comparable to another Layer-1, or to the DeFi applications on it? Is a token whose value derives from an exchange comparable to a payment network? Different reasonable answers give different peer groups, and therefore different relative-strength answers for the same asset. This analysis reads no ecosystem taxonomy and benchmarks every asset against Bitcoin and Ethereum instead.

WHAT THAT SUBSTITUTION ACTUALLY MEASURES. BTC and ETH are not a sector - they are the two largest assets, and crypto returns are strongly co-moving, so a spread against them behaves much more like a spread against the whole market than like a peer comparison. That makes the output closer to 'beta-adjusted market outperformance' than to 'leading its ecosystem'. Both are useful; they are different questions, and despite its name this analysis measures something nearer the first.

TWO ARITHMETIC POINTS STUDENTS GET WRONG.

• RANKING AGAINST A BENCHMARK CANNOT REORDER THE ASSETS. Subtracting the same benchmark return from every asset's return shifts every value by an identical constant, so the ordering by return and the ordering by spread are the same. What the subtraction changes is the LEVEL - whether an asset is positive or negative, and therefore which side of a classification threshold it lands on. Ranking against BTC and ranking against ETH can differ from each other, and each differs from raw return in level, not in order.
• BTC's OWN SPREAD AGAINST BTC IS ZERO by construction, so Bitcoin can never be an outperformer on its own benchmark.

THE MOMENTUM EVIDENCE. Cross-sectional momentum (Jegadeesh and Titman, 1993) is documented in equities and has been found in other asset classes including crypto, though with a much shorter history, far higher volatility, and a documented tendency for correlations to converge toward 1 in stress - which is precisely when a relative-strength ranking becomes least discriminating. A 30-day window also sits near the horizon where short-term REVERSAL rather than continuation is documented in equities.