There aren’t many silver linings for the cryptocurrency crash. People have lost money, even those who could least afford it. But a welcome casualty is the army of social media ‘influencers’ toxic promoters must certainly rank as one of the most egregious product-placement frenzy in financial history. After this, in the era of digital investment, the focus should be on the safety of investors.
At the peak of the wave, the basic identifier of Ledger Eye was optimism that bitcoin was headed for $100,000 and beyond, and these influencers included members of the US Congress, billionaires, sports stars and hordes of rank-and-file crypto enthusiasts. Was.
Lasers haven’t been shining so brightly since the latest foray into the cryptosphere, some going completely dark, possibly in an effort to do iconic damage control. The Winklevoss twins are busy promoting their next performance as a musician in a cover band called Mars Junction; Elon Musk insists that he never asked anyone to buy crypto. And celebrities who once showed off their irreplaceable tokens took them down.
Real changes will happen down the speculative food chain, as the fuel for viral economic narratives fuels crypto trading among influencers wanting to get rich quicker than the rest.
The business model of influencers is to take real money in exchange for promoting virtual cash. At one point, YouTubers were being offered $30,000 to promote crypto-linked investments. But money is drying up as trading on exchanges is dwindling and startup funding has disappeared. Even Coinbase Global, which has a market capitalization of over $12 billion, has cut affiliate marketing fees. Influencers who were earning $40 for each new sign-up on the platform a few months ago are now being offered $2 to $3.
American celebrities like Matt Damon and Larry David deserve to be slathered on them for promotional ads, but at least their affiliations were clear. Not all social media celebrities are scammers. But they had less transparent relationships with the products they were promoting — like YouTuber Logan Paul, a cheerleader for 23 million followers for the collapsed token Dink Donk, a project he told The New York Times in May, was “absurdly wrong” – apparently destroying the trust of followers in general.
And as the apparent ignorance of some crypto shills filters through to their fans, who will surely tire of the relentless claims that crypto is an ‘inflation hedge’, when it is anything to do with more regulatory intervention as well as TikTok. and likely voluntary action by other social media platforms. Some reality TV stars’ accounts have been shut down, Snapchat suspended Jazz and Laurent Correa last year.
It is not about censorship, but about transparency. Dogecoin co-creator Jackson Palmer has an umbrella term to describe our world: griftonomics. Applying it to crypto, he says, “reveals the network of influencers who bought it.” A study by the Dutch financial markets regulator of 150 influencers covering more than 1 million followers found that only a small fraction – about 1% – were not making money from affiliate projects. Many of which were not disclosed.
Officials have a role to play in cleaning up the worst excesses. Advertising overseers in the UK and France have done a good job of preventing deceptive advertising campaigns. Kim Kardashian and Floyd Mayweather were both sued in January, accusing them of hyping a digital token called EthereumMAX for investors. Mayweather was fined in 2018 by the US Securities and Exchange Commission for minting coins without disclosing financial interests beforehand, while last year Kardashian was fined by the UK Financial Conduct Authority for “a speculative digital token created a month ago”. Was warned for using his fanbase to promote. by unknown developers.”
But there is also a need for more financial and digital literacy. Young people are burdened with debt at an early age and feel the pressure intensely. There is also a sense that the accumulation of wealth comes from being lucky – born in the right generation or into the right family, or by endorsing the right token – rather than one’s merits. This helps explain why buy-now-pay-later loans have flourished among those who struggle to pay them, and why a vast majority of people follow and listen to influential people. Hears.
Parents and teachers have a role here, and perhaps even apps with guard rails allow for experimental spending with small amounts of cash. And it should also be possible for regulators to fight fire: misleading economic narratives about inflation hedges can be countered with other forms of misinformation by appropriately qualified market influencers.
But for now, people with laser eyes at their online profile photos have inadvertently slapped a clear health warning on their content. If you see those two red dots, steer clear.
Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France.