The truth behind crypto influencers
It is extremely difficult to establish which crypto influencers share investment ideas that they truly believe in and which have an ulterior motive for their recommendations.
As we discovered with our dearly departed friend John McAfee even the most credible influencers don’t usually discuss a project’s exceptional prospects unless there is something in it for them.
McAfee claimed to be telling his community about cryptocurrencies he believed in. He denied taking money from the projects he was ‘tipping.’ By accepting payment in exchange for lending his support to certain cryptocurrencies these apparent tips were more akin to financial promotions.
In McAfee’s case money talked not fundamentals.
Although McAfee is dead, the practice continues unabated.
A new breed of influencer
There are hundreds of people who have set themselves up on various social channels, such as Twitter, YouTube, Discord, Instagram, Facebook, and Telegram, claiming to be crypto experts and or influencers. The reality is they are no more of an expert than I am an expert in the history of the Roman Empire. I know the basics, but that is about it.
Many of these ‘influencers’ make their money by charging projects for promoting giveaways with the objective of attracting as many followers as possible.
What is a giveaway?
A giveaway promotion usually consists of a tweet saying something like:
- $100 giveaway — 12 hours
- Follow on Twitter
An influencer with a following of over 100k can attract more than 1,000 followers from a giveaway tweet within a few hours. The project pays the influencer around $100 plus the value of the prize.
There are similar giveaways for airdrops.
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Building a community
Investors are immediately impressed when they see that a project has thousands of Twitter and Telegram followers. It provides the project with credibility. The reality is a little different. 99.9% of these newly acquired followers are only there for the giveaway. When it comes time to invest, few if any of these newly minted followers will step up to the plate.
This new breed of influencers is different from the ones we will look at shortly. His or her followers are there for the prizes. Most of these followers have some vague interest in crypto, but those following the likes of influencers such as @moweau_is_back or @X100PumpHunter are there for the $20 prize or the free tokens for completing two or three simple tasks.
The influencer, of course, never reveals to his community that he is getting paid for his promotions, something our friends at the SEC will no doubt take a closer look at at some point.
These influencers are a relatively harmless bunch. Their promotions don’t really encourage people to invest in a particular cryptocurrency, directly anyway.
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The project owner
As a project owner, giveaways are part of the arsenal to help build their project’s community. Although we believe giveaways have their place, they are not an effective way of building a loyal community that will support the project in times of need. The only messages a project owner is likely to receive from their rapidly formed community are, ‘Where are my tokens?’ and ‘When are the tokens listing?’ Many projects waste thousands of dollars on giveaways.
Then we have the breed of influencers that we are all familiar with. The McAfee’s of this world.
Most are marginally more informed than the average crypto enthusiast, with their real talent lying in building large communities fast.
Let’s take the example of the well-known crypto influencer Zach Boychuk. Zach is a professional ice hockey player with over 800,000 followers. He tips memecoins on a daily basis to his crowd of followers, and he doesn’t do it for the love of it or because he believes in the token’s prospects. He does it for the cold hard cash. He is paid in tokens from the projects he tips for and cash. Of course, he doesn’t reveal this to his loyal followers. ‘I am Canadian, the rules don’t apply to me,’ he claims.
There are many like Zach who claims to be ‘gem hunters,’ but is, in fact, guns for hire. They will promote any old crap as long as they are being paid to do so.
We believe influencers are harmful to the ecosystem because they encourage a certain type of investor to follow their guidance with blind faith. Yes, there may be a caveat of ‘Do your own research,’ but many of these investors ignore this advice and buy anyway. The crypto community has even coined a name for them. Degens. As in degenerate investors. They buy on a whim. The idea of research is foreign to them. They are avid followers of influencers acting on their recommendations and basing their buying decision on catchy names and memes. It probably accounts for the huge influx of money into memecoins.
These people are the first to be wiped out during a market downturn. They will also end up bringing the regulator down hard on the industry in the same way that small private investors did when they negligently ploughed their money into penny stocks. Regulators will target influencers with disproportionate fines for failing to disclose their compensation, affecting 99% of all influencers.
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Moral of the story
We are not saying press the unfollow button on all your influencers. In fact, many of these people, although they are being paid to promote cryptocurrencies, provide a valuable source of information. They bring to our attention projects that we would otherwise not have heard of. Although most of these opportunities are total crap, there will be the odd gem.
What we are saying is to take what influencers tell you with a pinch of salt. They are not the gurus they claim to be. Treat them as a source of information only. Never invest after seeing a post claiming that this latest memecoin is the next Dogecoin. Do your own research. Never was that last sentence more important than when dealing with the scourge of the influencer.
No Financial Advice
This report does not constitute financial advice or a recommendation to buy in any way. Always do your own research and never invest more than you can afford to lose. Investing in cryptocurrencies is high risk, and you could lose 100% of your investment.