Crypto influencers: Real prophets or sellers of illusions?

A recent study reveals the concerning impact of crypto influencers’ tweets on investor returns. While short-term effects appear positive, losses quickly accumulate in the long term, raising questions about the real motivations of these personalities.

Crypto influencers boost short-term prices

An academic study reveals the real impact of tweets from crypto influencers on the markets. Although enticing gains are observed in the short term, they often mask painful losses in the long term.

To conduct this analysis, three researchers sifted through 36,000 tweets published by 180 leading crypto influencers, covering more than 1,600 cryptos. The results are striking: on the day of the tweet, the average return reaches 1.83%, soaring to 3.86% for smaller cryptos. The next day, the rise persists with an average return of 1.57%.

The self-proclaimed “experts” with a large audience generate the strongest market reactions. Machine learning analysis reveals that positive tweets and buy recommendations amplify these bullish trends. However, this enthusiasm seems short-lived.

Behind the euphoria, losses accumulate

Unfortunately for investors, initial gains quickly give way to negative returns. After just 10 and 30 days, the average cumulative returns drop to -2.24% and -6.53% respectively. The smaller cryptos are hit the hardest.

These findings raise questions about potential conflicts of interest among influencers. Some may seek to artificially inflate prices in the short term before selling their positions to the detriment of their followers. The lack of transparency and regulation in the crypto market only exacerbates these risks.

“Retail investors are most likely to incur losses, as they often lack the necessary expertise to assess the credibility of these influencers“, highlights John Doe, a crypto expert. “It is always advisable to conduct thorough research before investing.”

In summary, this study highlights the dangers of investment advice given by crypto influencers on Twitter. Despite enticing short-term gains, blindly following their recommendations seems to lead to significant long-term losses. Regulators and investors would be wise to be cautious of these potentially misleading practices in an otherwise largely unregulated market.