“Investments change fast; human nature and human aspirations stay constant.”

That is how Meir Statman, a behavioral finance pioneer, professor of finance at Santa Clara University and author of A Wealth of Well-Being, explains one of investing’s oldest puzzles. It may also explain why every crypto cycle to date has centered on chasing the next hot narrative rather than fundamentals, whether the theme is DeFi, meme coins or decentralized compute.

This pattern echoes decades of behavioral finance research, from Daniel Kahneman and Amos Tversky’s prospect theory — which showed that people systematically overweight small probabilities of large gains — to the dot-com bubble, where internet stocks with little revenue captured investor imagination long before the underlying technology delivered sustained returns.

Even as the industry has matured into an ecosystem that includes institutional investors, revenue-generating protocols and real-world use cases, investor attention still gravitates toward the next shiny story with the promise of outsized returns.

“Crypto is still a young asset class, and price discovery in young markets tends to be driven by attention before it’s driven by analysis,” Samar Sen, head of international markets at Talos, tells Magazine.

“A new narrative gives investors a simple story to underwrite quickly, while assessing the fundamentals of an established protocol takes real work, from understanding usage and revenue to token design and competitive position.”

This behavior is not unique to digital assets, but it is especially visible in an industry that often prizes memes over sustainable business models.

A Pokémon card, a digital asset and a tech stock

A recent MarketWise study compared hypothetical $10,000 investments across cryptocurrencies, stocks, exchange-traded funds and collectibles between January 2021 and April 2026.

The study found that a sealed Pokémon card box outperformed Bitcoin, while a pair of limited-edition sneakers nearly matched Dogecoin’s returns. At the same time, some of Wall Street’s most popular artificial intelligence funds lagged the broader stock market despite AI dominating investment headlines.

A $10K investment has very different outcomes. Source: MarketWise

What do a Pokémon card, a digital asset and a tech stock have in common? According to Statman, they are all driven by the same force: investors are not simply looking for the best asset, but for a lottery ticket to a life-changing outcome.

Investors are chasing transformation, not crypto

Traditional finance often assumes investors want to maximize returns while minimizing risk, but Statman argues that people frequently invest for a different reason.

In a recent paper on concentrated wealth in behavioral portfolios, Statman says many investors mentally divide their wealth into two layers.

The first is a “not-poor” layer, designed to preserve their standard of living and avoid falling into poverty. The second is a “be-rich” layer, intended for transformative goals such as buying a house, becoming financially independent or fundamentally changing their circumstances.

Within that framework, concentrated investments are not necessarily irrational. Diversified investing may be statistically sensible, but for someone with limited capital it may never offer a realistic path to those transformative goals.

James Royal, a senior writer at MarketWise, tells Magazine:

“The asset class may change, but the behavior barely does… Investors aren’t exactly loyal to crypto, stocks or collectibles. Their loyalty is to whatever promises lucrative returns next.”

Statman says that while some investors today pin their hopes on meme stocks, “a century ago it was railroad stocks […] today’s investors are simply expressing the same aspirations through a new asset class.”

Investors are not necessarily becoming more tolerant of risk, he argues; they are simply more willing to accept volatility for a chance at life-changing wealth.

“Investors aren’t necessarily on the hunt for risk, but they’ve got a case of FOMO on the next life-changing return, and that can lead them down a path of underestimated downside risk,” Royal says.

Why stories beat fundamentals

If investors are chasing transformation rather than simple returns, that helps explain why narratives so often overwhelm fundamentals, especially in crypto.

Decentralized finance offers a clear example. Despite major protocols such as Aave and Uniswap generating substantial revenue, attracting billions of dollars in deposits and processing large trading volumes, their tokens have struggled to attract the same excitement as newer narratives built around the latest market craze.

Aave’s token was trading at around $98 at the time of writing, roughly 85% below its 2021 peak, while its total value locked stood above $14 billion and had reached more than $37 billion at the height of the bull market in October 2025.

Aave’s TVL is over $14 billion while its token price is 85% from its 2021 peak. Source: DeFiLlama.

Part of that disconnect reflects structural factors beyond investor psychology. Many protocol tokens launched with multi-year vesting schedules and large allocations to teams and early investors, creating persistent sell pressure as tokens unlock regardless of how well the underlying protocol performs. Token design — including governance utility, fee-sharing mechanisms and staking incentives — also varies widely, meaning strong protocol usage does not automatically translate into token value accrual.

Thomas Probst, a research analyst at market data provider Kaiko, says that while assets may outperform in the short term, fundamentals remain more important over the long run.

“Market fundamentals continue to play an important role, particularly resilience, liquidity, and volatility… [an asset’s] ability to establish itself over time also depends on the robustness of its market structure,” he says.

Still, a mature protocol generating sustainable cash flow may be attractive over the long term, but it offers little appeal to investors allocating capital to their “be-rich” bucket. A token that may double over several years will always struggle to compete with the possibility, however remote, of a 100x moonshot.

“Investors like to confuse a great technological breakthrough with a great investment opportunity,” Royal says, which may help explain why many AI-focused ETFs have underperformed despite AI becoming one of the defining investment narratives of the era.

“The real skill isn’t identifying exciting investments, it’s recognizing when optimism has already been priced in.”

That same skill matters for market timing. MarketWise’s report found that investors who bought Bitcoin in January 2021 turned a hypothetical $10,000 investment into more than $24,000 by April 2026, a gain of 141%.

Those who bought at the cycle peak in October 2025 saw the same investment fall to just over $6,000 by April, a return of minus 38% — and it would be worth about $5,000 today.

Anyone who FOMO’d into AAVE around the same time would be sitting on 85% losses today.

Institutions play a different game

Institutional investors approach the market from a different perspective, Sen says.

“Institutional mandates simply don’t allow for chasing outsized, speculative returns. Institutions are underwriting risk-adjusted performance, liquidity, custody arrangements and operational resilience long before they look at upside potential.”

AAVE’s price performance since 2021. Source: Coingecko

That does not mean institutions are immune to emerging narratives, but they generally focus on whether the underlying infrastructure can support meaningful capital allocation rather than whether a token could 100x. The approval of spot Bitcoin and Ethereum exchange-traded funds in the United States has further widened the gap between institutional and retail behavior, giving traditional investors regulated, infrastructure-backed exposure that bypasses token-picking entirely.

“It’s usually a mix, and the order matters,” Sen says. “Most of these themes, DeFi, AI, memecoins, do start with a genuine shift: a real technical unlock or a new use case that wasn’t possible before.”

Once speculative money begins to flow, however, prices often move faster than fundamentals, he says.

“Investors arriving later in a cycle are often responding to the narrative as much as the fundamentals that started it […] Institutional capital, which tends to move on process and discipline rather than trend-following, is often a step behind the initial narrative and a step ahead of the correction.”

The next Bitcoin isn’t really the point

The search for the next life-changing investment is unlikely to disappear, and neither is the human desire to improve one’s circumstances, Statman argues.

The next 100x token likely exists, and investors will keep looking for it — even when the odds and the fundamentals suggest they are looking in the wrong place.

Magazine: The real reason DeFi projects that survived 2022 crash are shutting down now