Extreme Returns

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One of the ways long-term wealth is created is through disruptive technology that reshapes our world. The companies that leverage this technology reap extreme returns for turning ideas into an essential part of everyday life.

Academic research has shown that from 1926 to 2017, only 90 companies were responsible for half of the $35 trillion of wealth created by US stocks.

The story of investing is the classic 80/20 rule.
80% of the rewards are reaped by roughly 20% of companies.

How do these companies take home the largest slice of the rewards pie?
Think utility, scalability and competitive advantage.

This applies as much to cryptocurrencies as to stocks.

In fact, we propose that the days of "growth" vs "value" stocks are over.

In the long-term...5, 10, 15+ years, a better question to ask is – will a company/coin prove useful, scalable, and miles ahead of the competition?

If so, it will have both "growth" and "value" baked into the price of the asset.

This is the level of quality we're searching for when it comes to Web 3 coins/companies.

In this post, we mentioned that extremes are our allies in trend forecasting.

Part of what we do factors in extreme value analysis. It's a valuable method for examining stock/crypto price movements, specifically extreme returns, and can be more efficient in helping manage risk/return probabilities.

The upside to price is unlimited and unknown.
The downside stops at 0 (assuming no leverage) or 100% down from the all-time high price.

Extreme #1 -

Over the past 12 months, we can see most of the Top 100 coins are down 55% to 90%, with some NFT outliers.

Extreme #2 -

Historically, when the Fear & Greed Index strikes and finds support around 10, it signals a trend reversal for a season.

Let's look at how BTC's price responded when Fear & Greed reached this extreme between 0-10 ...

DEC 2018 - $4,083

AUG 2019 - $9,785

MAR 2020 - $3,909

JULY 2021 - $29,220

JAN 2022 - $36, 887

MAY 2022 - $28,630

During this window, BTC broke through resistance at $19K, $36K, $44K, and $65K.

Interesting to see that BTC is likely to revisit a previous low within an 18 month window, as seen in DEC 2018/MAR 2020 and JULY 2021/MAY 2022.

The big picture reveals historically that the long-term outperforms the short-term.

DEC 2018 to May 2022 resulted in a 7X return, assuming a simple buy and hold strategy.

The fear in the market right now wants certainty. There's none to be had.

Like a captain demanding the weather to be 100% sunny skies for his 6-month voyage. His colleagues would seriously question his naval experience.

The only certainty is strategic planning to adapt and thrive on the open seas of investing, as technology continues to change people, processes, and policies.

Let's look at how the forecast was impacted, given recent events...