Blockchain without Crypto? Linking On-Chain Data Growth to Firm Fundamentals and Stock Returns

Despite the explosive growth of cryptocurrencies and decentralized finance, whether the underlying technology adds significant value and will thus sustain broad adoption remains unclear. Using proprietary data on firm-level blockchain records from 2015 to 2021, the authors conduct the first large-sample study linking blockchains to firm fundamentals and asset valuation in a country where cryptocurrencies are completely banned. The authors find that year-on-year quarterly blockchain data growth (BDG) contains value-relevant information for nowcasting and forecasting assets growth, sales growth, ROA, standardized unexpected earnings (SUE), and innovation outcomes measured through patents. BDG also predicts stock returns, especially around future earnings announcements, with a long-short BDG-sorted portfolio generating a 10.56% risk-adjusted return annually. The findings are robust across industries and regions, superior compared to other nowcasters, and hold in international samples. The authors further discuss the underlying economic channels (e.g., continuous disclosure and reduction in information asymmetry) and provide evidence for causality which are consistent with real-life use cases and heterogeneity analyses that reveal firms with greater information asymmetry, lower disclosure quality, and less public trust benefit more from blockchain adoption and on-chain data growth.