The silence of influencers in a rapidly fading cryptosphere

There isn’t much silver lining to the cryptocurrency crash. People, even those who could afford it the least, lost money. But a welcomed casualty is the army of social media “influencers”, toxic promoters that should definitely rank as one of the scariest product placement sprees in the history of finance. What comes next should be a focus on investor protection in the age of digital investment.

At the peak of the wave, the key descriptor of laser eyes was optimism that Bitcoin was heading to $100,000 and beyond, and these influencers included hordes of US Congressmen, billionaires, sports stars, and casual crypto enthusiasts.

The lasers aren’t that bright after the latest rout in the cryptosphere, with some going completely black, possibly in an effort to control reputation damage. The Winklevoss twins are busy promoting their next performance as musicians in a cover band called Mars Junction; Elon Musk insists he didn’t tell anyone to buy crypto. And celebrities who once showcased their non-tradable tokens took them down.

Real changes will be further down the speculative food chain as the fuel runs out for viral economic narratives promoting crypto trading among impressionable people eager to get rich faster than others.

The business model of influencers is to receive real money in exchange for promoting virtual money. At one point, YouTubers were offered $30,000 to encourage crypto-related investments. But money is drying up as trading on exchanges dwindles and startup funding disappears. Even Coinbase Global, which has a market cap of over $12 billion, has slashed its affiliate marketing fees. Influencers who just months ago earned $40 for each new sign-up to the platform are now offered $2 to $3.

American celebrities like Matt Damon and Larry David deserve the mud thrown at them for their promotional ads, but at least their connection was clear. Not all social media personalities are scammers. But those with less transparent ties to the products they promote — like YouTuber Logan Paul, who cheered 23 million followers for Dink Doink, a project he told The New York Times in May that he told The New York Times had gone “ridiculously wrong” — are clearly undermining followers’ confidence in general. .

And since the blatant ignorance of some cryptocurrencies has infiltrated its fans, who will surely grow tired of the constant claims that crypto is an “inflation protection”, there is likely to be more regulatory intervention as well as voluntary crackdowns by TikTok and other social media platforms. Some reality TV stars have had their accounts suspended after Snapchat suspended Jazz and Laurent Correia last year.

It’s not about censorship, it’s about transparency. Jackson Palmer, co-creator of Dogecoin, has an umbrella term to describe our world: Griffonomics. A study by the Dutch financial markets regulator of 150 influencers with over 1 million followers revealed that only a small fraction of them—about 1%—do not make any money. from affiliated projects. Most are not disclosed.

Authorities have a role to play in cleaning up the worst excesses. Advertising inspectors in the UK and France have done a good job of stopping misleading advertising campaigns. Kim Kardashian and Floyd Mayweather were sued in January after being accused of exaggerating a digital token called EthereumMax for investors. Mayweather was fined by the US Securities and Exchange Commission in 2018 for launching the coin without disclosing a financial interest, last year Kardashian used her fan base to promote “a speculative digital token created a month ago” in UK Financial Conduct He was warned by his authority. by unknown developers.”

But more financial and digital literacy is also needed. Young people are being burdened with debt at an increasingly early age, and they feel this pressure sharply. There is also a feeling that wealth is accumulated not by one’s merit but by being lucky (born in the right generation or the right family or supporting the right engagement). This helps explain why buy now pay later loans thrive among those struggling to pay them back, and why a high percentage of people follow and listen to influencers.

There is a role for parents and educators here, and there are even guarded applications to allow for experimental spending with small amounts of cash. It should also be possible for regulators to fight fire with fire: Misleading economic narratives about inflation hedges can be challenged by suitably qualified market influencers, as with other forms of misinformation.

But for now, people with laser eyes in their online profile photos have unwittingly slapped an obvious health warning on their content. If you see these two red dots, stay away.

Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France.

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