As far as I know, this isn’t common for sisters-in-law, especially when they started out as friends. It’s also true, though, that friendships sometimes diverge. What was interesting to us about someone at one stage in life isn’t so in another. If the two of you were just friends you could just go your separate ways. But you two are family now so it’s harder to let the relationship fade. You’ll undoubtedly need to show up at the same family events and gatherings. You don’t want every occasion to be awkward or hostile.
I haven’t a clue why she is such an angry person. Chances are it has nothing to do with you and therefore you can’t fix it. What you can do is focus on yourself, rather than try to change her. You admit that you’ve gotten hooked into the competition. You might ask yourself why. It hasn’t helped the situation. It probably doesn’t really matter who “wins.” You’re bigger than that. What do you care if she outdoes you now and then? Congratulate her and move on. You can let go of the competition without letting go of the relationship. Be friendly. Keep conversations on a surface level. Do’t expect her to be happy for you when she isn’t happy in herself. If you can manage that approach, holiday meals and family get togethers can go smoothly even if you aren’t as close as you once were.
I wish you well.