Fundamental and Speculative Components of the Cryptocurrency Pricing Dynamics

The driving forces behind cryptoassets’ price dynamics are often perceived as being dominated by speculative factors and inherent bubble-bust episodes. The fundamental components are believed to have a weak, if any, role in price formation and emergent dynamics. This research studies five cryptoassets with different backgrounds, including Bitcoin, Ethereum, Litecoin, XRP, and Dogecoin between 2016 and 2022. It utilizes the cusp catastrophe model to connect the fundamental and speculative drivers with possible price bifurcation characteristics of events of a market collapse. The findings show that all studied assets except Dogecoin demonstrate their price and returns dynamics emerge from complex interactions among both fundamental and speculative components, including episodes of pricing bifurcations. Bitcoin shows the strongest fundamentals, with the on-chain activity driving the fundamental part of the dynamics. Investor attention mainly drives the speculative component for all studied assets. Thus, the fundamental factors should not be left out when constructing cryptoassets pricing models