How Herding and Hype Shape Crypto Investing

A cryptocurrency can attract thousands of new buyers without becoming a better investment. A surge in searches can signal growing interest without revealing whether prices will rise. Those distinctions matter because investors often treat popularity, confidence, and expected returns as interchangeable.

A new study, Behavioral Drivers of Cryptocurrency Markets: A Systematic Review, examines how psychology influences crypto investing and market outcomes.¹ Sebastian Steindl, Hans Rüdiger Kaufmann, and Bernd Britzelmaier synthesize 67 peer-reviewed studies, drawing a useful boundary between behaviours that encourage participation and those more closely linked to returns, trading volume, and volatility.

The review supports taking investor psychology seriously. It also shows why explaining a rally after it happens is easier than predicting one beforehand. Its most valuable lesson is that participation and prediction require different evidence.

What Research Reveals About Crypto Investor Behaviour

The researchers searched seven academic databases and supplemented their searches with reference and citation checks. The final sample contains studies published between 2018 and mid-2026. Rather than pooling results into a single statistical estimate, they organized the evidence by behavioural mechanism and outcome.

Attention, herding, lottery-like preferences, and prospect-theory-based pricing have the strongest evidence connecting them to market outcomes. Prospect theory describes how people evaluate uncertain gains and losses, including their tendency to react differently depending on how outcomes are framed.

FOMO, overconfidence, and social norms are more strongly supported as explanations of investment intentions, participation, and speculative decisions. That distinction prevents a common analytical mistake: assuming that a factor encouraging someone to buy must also reliably explain what the market does next.

The table summarizes the review, not a ranking of profitable trading strategies. Its evidence-strength assessments are qualitative judgments across studies with different methods, populations, and assets.

Why Crypto Popularity Does Not Predict Returns

Consider a hypothetical token that suddenly dominates social media. Some people investigate its technology. Others buy because friends appear to be making money. Existing holders become more confident as the price rises. All three responses can increase attention, but they represent different motivations.

Search activity alone cannot establish which motivation dominates. It may reflect curiosity, panic, or an attempt to understand an event that has already happened. A price jump can generate attention just as attention can potentially influence trading.

Securities.io has explored this problem in its coverage of whether Bitcoin sentiment drives price or follows it (BTC ). The broader lesson is to ask what an indicator measures before using it to support a forecast.

There is also a timing problem. A widely discussed investment opportunity may already have attracted substantial buying. Correctly identifying enthusiasm does not reveal how much additional demand remains, how willing existing holders are to sell, or whether the current price compensates for risk.

The review identifies a persistent gap between directly measured investor psychology and observed market outcomes. Surveys can reveal intentions without recording subsequent trades. Market data can reveal trading patterns without proving the underlying motivation. Connecting both requires more than a persuasive narrative.

The Hidden Appeal Of Cheap Crypto Tokens

Lottery-like preferences offer another useful angle. Investors may be drawn to assets that appear capable of producing extraordinary gains, even when those outcomes are unlikely. The review finds meaningful evidence connecting this preference to differences in cryptocurrency returns.

Several reviewed studies associate extreme recent gains with weaker subsequent returns. Other evidence points toward momentum, with results varying according to the observation period and measurement choices. This does not establish a universal rule that rapidly rising tokens must fall.

Instead, it highlights the importance of distinguishing an attractive story from an attractive entry price. A token that has already delivered spectacular gains can feel more promising precisely when enthusiasm has made it more expensive.

The review also discusses the emotional appeal of low nominal prices and the search for the next Bitcoin. Here, basic valuation arithmetic provides a practical extension: a token costing one cent is not necessarily cheaper than one costing thousands of dollars. Circulating supply matters, while future issuance can alter the ownership economics.

Token denomination is therefore a poor shortcut for assessing upside. Investors gain more useful information by examining supply, market capitalization, liquidity, and the economic role of the token.

Turning Crypto Psychology Into Better Investment Decisions

The opportunity is to improve the decision process rather than attempt to eliminate emotion. A framework established before excitement builds gives investors a reference point when market narratives become persuasive.

• Write down the investment thesis and what would invalidate it.
• Set exposure limits before a rally changes your risk appetite.
• Separate evidence of adoption from evidence of a reasonable price.
• Review decisions on a schedule instead of reacting to every headline.

These are practical implications, not strategies tested by the review. Their purpose is to make decisions more consistent and easier to evaluate afterward.

A June 2026 Charles Schwab (SCHW ) article featuring conversations with crypto investors offers a modest real-world illustration. Participants described balancing curiosity with volatility concerns, limiting portfolio exposure, and seeking trustworthy information. Three interviews cannot establish population-wide behaviour, but they illustrate that interest and caution can coexist.

A further opportunity concerns platform design. Exchanges could make supply information, concentration risks, and transaction costs easier to evaluate before an order. That is an editorial inference from the behavioural evidence, not a finding that a particular interface improves returns.

Coinbase Connects Crypto Participation With Business Revenue

The distinction between participation and investment performance also matters when evaluating companies serving the sector. An exchange earns revenue from customer activity and services, creating an economic connection to crypto adoption that differs from owning a token.

Coinbase Global (COIN ) provides a relevant publicly traded example. Its business spans trading, custody, stablecoin-related services, and blockchain infrastructure. Readers seeking platform background can consult Securities.io’s updated Coinbase review.

According to its second-quarter 2026 filing, Coinbase generated $599.2 million in transaction revenue and $555.1 million in subscription and services revenue. Both were below the corresponding prior-year figures, and the company reported a net loss.

Meanwhile, its July 2026 earnings update emphasized trading market-share gains and revenue diversification. It reported that 88% of net revenue came from sources other than Bitcoin spot trading.

That percentage does not mean the business is insulated from crypto cycles. Other trading products remain sensitive to activity, and service revenues have their own dependencies. It does show why evaluating Coinbase requires more than forecasting Bitcoin.

The investor question becomes whether the company can turn customer acquisition into lasting relationships, useful services, and sustainable earnings. The review does not evaluate Coinbase, but it helps explain why bursts of attention should be distinguished from durable commercial demand.

Latest Coinbase Global (COIN) News And Developments

Better Crypto Analysis Starts With Better Questions

The review offers a constructive path toward understanding crypto markets. Psychology influences decisions, but its effects vary across investors, assets, and market conditions. Many existing studies establish associations rather than causation, and the authors’ transmission framework remains a conceptual synthesis.

For investors, the useful advance is greater precision: ask whether a signal describes interest, actual trading, or subsequent performance. For companies, ask whether activity creates enduring value. Those questions turn behavioural finance into a tool for clearer judgment without pretending that crowd psychology supplies an easy forecast.

References:

¹ Steindl, S., Kaufmann, H. R., & Britzelmaier, B. (2026). Behavioral drivers of cryptocurrency markets: A systematic review. Journal of Behavioral and Experimental Finance. Advance online publication. https://doi.org/10.1016/j.jbef.2026.101265