Initial Exchange Offerings are Providing Big Returns, But Why?

"In particular, IEOs or"Initial Exchange Offerings" have been highly visible for both good and bad reasons.

Positively, IEOs have produced large returns to-date.

New and small-cap digital assets are highly reflexive and driven by two key variables, exchange volume and market cap.

The aforementioned speculative demand can be quantified by the ratio of ExVol to MCAP, which may offer investors a better tool to gauge risk and reward in these speculative assets.

The chart below displays the correlation of the speculative demand ratio to in price of several IEOs.

The chart is broken down into distinct time periods, which shows the efficacy of the ratio as the asset matures, e.g. first 60 days, first 180 days, first 360 days, and historical.

This time, the chart below displays the correlation of the speculative demand ratio to in price of several small-cap assets as a way to generalize the ratio to all new issuances, not just IEOs in 2019.

As the aforementioned charts illustrate, the speculative demand ratio is a highly valuable signal for investors looking at IEOs or new digital assets, especially during the first 180 days of existence.

Post-180 days, the ratio is still useful for price prediction, but its signal diminishes.

For newer IEOs like MATIC, CELR, and FET, the correlation of the speculative demand ratio is likely to rise over the coming months.