Study Reveals Crypto Influencers’ Recommendations Lead to Losses

The average cumulative return on positions opened based on crypto influencers’ signals on X was -2.24% after 10 days and -6.53% after 30 days, according to researchers from three universities.

The return on investments on the first and second days following recommendations was 1.83% and 1.57%, respectively, with small-cap tokens seeing a 3.86% increase after one day.

In other words, experts’ tweets trigger short-term price increases. In the long term, the effect turns negative.

The impact is most pronounced for posts published by those who position themselves as experts and influencers with the largest number of followers.

Below is the statistics of the top 25 opinion leaders in the industry by number of mentions and tracked tokens.

Top 25 Crypto-Influencers by Number of Mentions pic.twitter.com/6c9lEucdZj

— Wu Blockchain (@WuBlockchain) May 16, 2024

This pattern is more pronounced when posts have a more positive tone or are related to “buy” recommendations.

Researchers concluded that such advice holds little value.

The data may support regulators’ concerns that crypto influencers can mislead investors, the specialists added.

The team comprised representatives from Indiana University, Harvard Business School, and Texas A&M University.

The sample was based on 36,000 tweets published by 180 of the most well-known crypto influencers. The study covered recommendations on 1,600 assets over a two-year period up to December 2022.

Scientists used machine learning methods to classify the tweets.

The study’s methodology and data analysis provide insight into how social media influencers can impact investment decisions, the document states.

The work underscores the need for ongoing study of social media’s influence on market participants’ actions.

In February, crypto blogger Ben Armstrong, known for the YouTube channel Bitboy Crypto, held a bout against developer More Light. The event led to a rise in two meme tokens.

Earlier, the social Web3 network So-Col (Social Collectables), founded by crypto influencer Irene Zhao, raised $4.5 million.