Social Media Hype vs. Reality
Investors in the crypto market are getting bombarded with advice from social media influencers. These influencers claim to have special insights, but a new study shows their predictions might not be worth much.
Influencer Tweets: Short-Term Hype, Long-Term Losses
Researchers analyzed tweets from over 180 crypto influencers. They found that tweets could boost prices in the short term (about 2% in the first two days), but these gains quickly disappeared. In fact, within a month, the cumulative return dropped by almost 7%.
Pump and Dump Schemes
The study suggests that influencer tweets can create a temporary price spike, but it’s often followed by a significant decline. This suggests that the buying frenzy is not based on solid fundamentals.
Real-World Examples
There are real-world examples of this. For instance, YouTuber Logan Paul’s CryptoZoo project attracted millions in investments before it was accused of being a “rug pull” (a scheme where developers abandon a project after taking investor money).
Influencer Recommendations: Often Lead to Losses
Researchers from three universities analyzed 36,000 tweets from prominent crypto influencers. They found that positions opened based on these signals showed a decline of 2.20% after 10 days and 6.50% after 30 days.
Celebrity Hype and Regulation
Regulators are starting to pay attention to the rise of influencer marketing in the crypto space. The European Commission has recently complained about potentially misleading crypto promotions on social media.
Investors Beware
It’s important to be cautious about investment advice from social media influencers. They may be entertaining, but they shouldn’t be your main source of information.
