On surface level, the cryptocurrency sector and its associated investments — including blockchain miner TeraWulf (WULF) — seemingly offer a no-brainer proposition. With Donald Trump set to take office shortly, the decentralized digital asset ecosystem rocketed higher. With “The Donald” openly supporting crypto-related initiatives, it’s natural to assume that the sector will continue rising.

Obviously, no one knows for sure what will happen next. However, it may be better for investors to consider a more conservative route.

For one thing, the upside narrative seems too obvious. Yes, Trump is a vocal supporter of cryptos but that is now a well-established fact. It’s not as if it’s a mystery as to who will succeed outgoing President Joe Biden. Generally, the market moves on anticipation of news, not on its broadcasting; hence, the phrase buy the rumor, sell the news.

Second, several blockchain-related enterprises have already witnessed robust growth. In particular, WULF stock popped 9.4% on Friday. For the business week ending Jan. 17, the equity swung up 24.51%. While one can’t say never, it’s unlikely for WULF to keep repeating such powerful performances, especially on old news. Indeed, Friday’s afterhours session saw a slight decline in market value.

Third, traders may be leery of putting all their eggs in one blockchain basket, especially if it happens to be a horse that everyone is betting on. TeraWulf isn’t the biggest player in the field, yet it commands a Strong Buy consensus view among Wall Street analysts. The only “dissenting” voice in the analyst community is a Hold rating.

On one hand, it may be encouraging that the experts are aligned in their assessment of WULF stock. Then again, it’s not uncommon for the heavy favorites to no longer perform to expectations, ironically because the crowded arena no longer provides adequate breadth for robust growth.

Statistical Evidence Against Overenthusiasm for WULF Stock

To be clear, WULF stock may continue marching higher over the next few weeks. I’m not sure if there’s anyone arguing that the blockchain ecosystem will crumble from here. No, the point I’m trying to make is that — at least in the near term — investors shouldn’t expect blistering returns in WULF like what materialized on Friday.

Statistically, TeraWulf carries a slightly negative bias regarding its market performance. On a week-to-week basis, there’s a 50% chance that your position in WULF stock will rise in value. On a four-week timeline, there’s only about a 46% chance that your position held at the beginning of the period will rise in value by the end of it.

However, the usual fear-greed continuum can be disrupted under extraordinary circumstances. For example, in the past five years, the average performance over a one-week period lands at 1.04%. During the business week ending Jan. 10, WULF stock incurred a one-week loss of 16.8%, a particularly aberrant performance.

As it turns out, there have been 37 times when WULF stock incurred a one-week loss between 10% and 20%. Of this tally, there have been 22 times when WULF delivered a non-zero positive return by the end of the fourth subsequent week. During these positive outcomes, the median positive return stands at 18.46%.

In other words, while the everyday “stochastic” rhythm of WULF stock is neutral to slightly bearish, when an extreme-fear event materializes, more often than not, speculators rush in, bidding up the security. The end result is that the character of TeraWulf shifts rather dynamically and bullishly in response to pessimistic pressure.

However, the caveat is that the biggest single-week percentage boost occurs in the week immediately following an extreme-fear event. From the second week onward, the upside performance is much more gradual. Therefore, it may be imprudent to assume a dramatic lift in WULF stock this coming week.

Investors Can Extract Max Upside Potential with Call Spreads

Assuming statistical trends play out as predicted, the upside from now until the conclusion of the fourth week following the extreme-fear event (which coincides with the options chain expiring Feb. 7) could be rather limited. Based on my calculations, the projected performance could be just under 10%.

Based on Friday’s closing price of $6.40, the bulls may try to push WULF stock to $7.03 by the close of the Feb. 7 session. If so, bull call spreads featuring a short leg strike of $7 may be ideal. But which long leg should you choose? That’s where a Barchart Premier membership can be extraordinarily helpful.

With premium access to the platform, investors can pull up all mathematically viable bull call spreads (or any available strategy) for the desired options chain. One compelling idea is to consider the 6/7 call spread (buy the $6 call, simultaneously sell the $7 call), allowing the speculator to pick up a considerable payout should WULF hit or exceed the short strike target.

For the most aggressive trader, the 6.50/7.50 call spread could be intriguing. To receive the maximum reward, WULF must reach $7.50, which isn’t out of the question. If it does, speculators can enjoy a payout of nearly 178%, which is a far cry from the 17% move that would be implied in an open-market transaction.