Markets
The inside story of an opaque and risky market
Sun 19 May 2024 ▪ 3 minute read ▪ by Fenelon L.
A recent study reveals the worrying impact of cryptocurrency influencers’ tweets on investor returns. While the short-term effects seem positive, the losses accumulate quickly in the long term, raising questions about the real motivations of these personalities.
Cryptocurrency influencers boost prices in the short term
An academic study reveals the real impact of crypto influencers’ tweets on the markets. Even if there are attractive gains in the short term, they often mask painful long-term losses.
To conduct this analyses, three researchers sifted through 36,000 tweets posted by 180 top cryptocurrency influencers, covering more than 1,600 cryptocurrencies. The results are sensational: on the day of the tweet the average return reached 1.83%, with a surge to 3.86% for the smaller cryptocurrencies. The next day, the rally persists with an average return of 1.57%.
Self-proclaimed “experts” with large audiences generate the strongest market reactions. Machine learning analysis reveals that positive tweets and buy recommendations amplify these bullish trends. However, this enthusiasm seems short-lived.
Behind the euphoria, losses accumulate
Unfortunately for investors, initial gains quickly give way to negative returns. After just 10 and 30 days, the average cumulative returns drop to -2.24% and -6.53% respectively. Smaller cryptocurrencies are the most affected.
These findings raise questions about potential conflicts of interest among influencers. Some may seek to artificially inflate prices in the short term before selling their positions to the detriment of their followers. The lack of transparency and regulation in the cryptocurrency market only exacerbates these risks.
“Retail investors are more likely to suffer losses, as they often lack the expertise to assess the credibility of these influencers,” points out John Doe, a cryptocurrency expert. “It is always advisable to conduct thorough research before investing.”
In summary, this study highlights the dangers of investment advice provided by cryptocurrency influencers on Twitter. Despite the enticing short-term gains, blindly following their recommendations appears to lead to significant long-term losses. Regulators and investors would do well to pay attention to these potentially misleading practices in an otherwise largely unregulated market.
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Fenelon L.
Passionate about Bitcoin, I want to explore the meanings of blockchain and cryptocurrencies and participate in my discoveries with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everyone, and I firmly believe that Bitcoin is the tool that can make this possible.
DISCLAIMER
The views, thoughts and opinions expressed in this article are solely those of the author and should not be relied upon as investment advice. Do your research before making any investment decisions.