Recommendations from crypto influencers lead to losses, scientists from three universities said.
According to Chinese journalist Colin Wu, the average accumulated return on positions opened based on signals from crypto influencers in X after 10 and 30 days decreased by 2.24% and 6.53%, respectively.
Representatives of Indiana University, Harvard Business School, and Texas A&M University cite these figures. The sample was based on 36,000 tweets published by 180 prominent crypto influencers. The study covered recommendations for 1,600 assets over two years to December 2022.
Top 25 Crypto-Influencers by Number of Mentions pic.twitter.com/6c9lEucdZj
— Wu Blockchain (@WuBlockchain) May 16, 2024
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The profitability of transactions on the first and second days after the recommendations amounted to 1.83% and 1.57%, respectively, for tokens with small capitalization a day later, a gain of 3.86%.
In other words, expert tweets cause short-term price increases, but the effect becomes negative in the long term.
The influence is most noticeable for posts published by those who position themselves as experts and among influencers with the largest number of followers. Experts added that the data may confirm regulators’ concerns that crypto-influencers may be misleading investors.
In February, researchers found that emojis that express positive sentiment on social media can predict upward movements in the cryptocurrency market. By buying Bitcoin (BTC) when positive sentiment was detected via emoji and selling it the next day, the researchers achieved consistent profits, beating standard market trends.
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