The Hidden Fundamentals of Cryptocurrencies

For years, cryptocurrencies have been described as markets without anchors: no dividends, no cash flows, no balance sheets, no obvious fundamental value. Prices rise and fall with extreme violence, narratives change quickly and attention often seems to move faster than the technology itself. But is this really a market without fundamentals? Or are its fundamentals simply different from the ones finance is used to observing and discounting?

The Different Fundamentals of Cryptocurrencies 

This is the starting point of our research on predictive sorting in cryptocurrencies. The question is not whether Bitcoin or Ethereum can be valued like a stock. They cannot. The more interesting question is whether crypto markets contain signals that help us understand what investors collectively expect. If a blockchain is a network, the intensity of participation in it should matter. If security requires computational power, the hash rate (i.e. the total computational power used by miners to validate transactions and secure the Bitcoin network) should matter. And if prices are shaped by attention, fear and enthusiasm, sentiment should matter too.

Three Signals for Reading the Market

We look at three signals: active users, hash rate and Google search intensity. The first captures network participation. The second captures the resources committed to securing a blockchain. The third captures public attention. In traditional finance, fundamentals and sentiment are often treated as separate worlds. In crypto, they coexist almost visibly. A protocol may be technically robust but ignored. A token may attract attention, yet lack strong fundamentals. Expectations are formed in the midst of the tension between these forces.

The evidence in our work suggests that this tension is informative. Using weekly data from August 2015 to April 2025, and subsequently extending the analysis to 40 cryptocurrencies, we find that these signals help forecast returns out of sample. This matters because the exercise is not limited to explaining the past with hindsight. The fundamental predictors are asked to forecast cryptocurrency prices in real time, against a simple benchmark based on historical average returns. In most cases, they do.

Predictability, Attention and Economic Value

This result is especially striking because predictive power is not confined to the assets for which the signals seem most natural. Hash rate is technically tied to proof-of-work systems, yet it also contains information for non-mineable cryptocurrencies. This suggests that blockchain fundamentals may work not only as engineering variables, but also as market-wide indicators of trust, security and activity. Similarly, Google sentiment is not just noise. It often performs as well as more conventional blockchain indicators. Attention is not external to crypto pricing. It is part of the market's infrastructure.

Does this mean that crypto returns become easy to predict? No. It means something more modest, and more useful: some cryptocurrencies are more predictable than others, and that difference has economic value. When we sort cryptocurrencies according to past predictive performance, buying those with stronger predictability and selling those with weaker predictability, the strategies generate positive returns and significant alphas. The effect is stronger when predictability is measured in risk-adjusted terms. For investors, a forecast matters only if it improves the trade-off between return and risk.

A More Disciplined Way of Reading Crypto Markets

What does this change in the way we read crypto markets? First, it suggests that crypto markets are not pure casinos driven by sentiment fluctuations. They do react to attention, but attention itself can be measured and interpreted. Second, blockchain variables such as users and hash rate are not merely technical details. They provide measurable traces of adoption, security and confidence. Third, the boundary between fundamentals and market mood is unusually porous. In crypto, use, trust and attention move together more closely than in traditional asset classes.

The point is not that crypto assets can now be valued with the same tools used for equities or bonds. They cannot. The point is more limited, but important: blockchain activity and investor attention contain information that markets seem to process. For researchers and investors, this offers a more disciplined way to look at a market often described as purely speculative: not by searching for one definitive fundamental, but by asking which observable signals help distinguish noise from economically useful information.