There are not many silver linings to be found in the cryptocurrency crash. People have lost money, often those who could least afford it. However, one welcome casualty is the army of laser-eyed social media “influencers,” toxic promoters in what must surely rank as the one of the most egregious product-placement manias in financial history. What comes next should be a healthier focus on consumer protection in an age of digital investing.
The simple identifier of a pair of laser eyes — a badge of optimism that Bitcoin was headed for US$100,000 and beyond — at its peak adorned the avatars of lawmakers, billionaires, sports stars and, of course, hordes of rank-and-file crypto enthusiasts.
The lasers are not shining so brightly after the latest rout in cryptoland, with some going completely dark, presumably in an effort at reputational damage control. The Winklevoss twins are now busy promoting their next act as musicians in covers band called Mars Junction; Elon Musk is insisting he never told anyone to buy; and celebrities who once flaunted their non-fungible tokens have now taken them down.
The real changes will come lower down the speculative food chain, as the fuel runs out for viral economic narratives promoting crypto trading among young and impressionable consumers eager to get rich quicker than the rest of society.
The business model of influencers is to take real dollars in exchange for promoting virtual cash. At one point, YouTubers were being offered US$30,000 to promote crypto-linked investments. However, those dollars are drying up as trading on exchanges diminishes and start-up funding disappears.
Even Coinbase Global Inc, with a market capitalization of more than US$12 billion, has slashed affiliate marketing fees, according to Business Insider. Influencers who just months ago were making US$40 for each new sign-up to the platform are now being offered US$2 to US$3.
Celebrities such as Matt Damon and Larry David deserve the mudslinging for promoting ads, but at least their affiliations were clear. Not all social media personalities are scammers — but those with less transparent ties to the products they were promoting — such as YouTuber Logan Paul, a cheerleader to his 23 million followers for collapsed token Dink Doink, a project that he told the New York Times in May went “absurdly wrong” — are clearly eroding the trust of followers in general.
And as the obvious ignorance of some crypto shills filters through to their fans — who will surely tire of the constant claims that crypto is an “inflation hedge” when it is anything but — more regulatory intervention as well as voluntary crackdowns by TikTok and other social media platforms are likely not far behind. Some reality TV stars’ accounts have been shuttered, with Snapchat suspending Jazz and Laurent Correia last year.
This is not about censorship, but transparency. Jackson Palmer, Dogecoin’s cocreator, has an umbrella term to describe our world: Griftonomics. Applying it to crypto reveals a network of “bought influencers,” he said.
One study by the Dutch financial markets regulator of 150 influencers covering more than 1 million followers found that only a tiny fraction — about 1 percent — were not making money from affiliated projects — many of which were not disclosed.
The authorities obviously have a role to play in cleaning up the worst excesses. Advertising overseers in the UK and France have done a decent job in halting misleading ad campaigns. Kim Kardashian and Floyd Mayweather were both sued in January, accused of hyping a digital currency called EthereumMax to investors.
Mayweather had already been fined by the US Securities and Exchange Commission in 2018 for touting coins without disclosing a financial interest, while last year Kardashian was admonished by the UK Financial Conduct Authority for using her fanbase to promote “a speculative digital token created a month before by unknown developers.”
However, there is an urgent need for more financial and digital literacy, too. Young people are saddled with debts at an increasingly early age and feel the pressure acutely. There is also a feeling that wealth is accumulated through being lucky — born in the right generation or to the right family, or by backing the right token — rather than due to merit.
That helps explain why Buy-Now-Pay-Later loans have flourished among those who struggle to repay them, and why a high percentage of people follow and listen to influencers.
There is a role here for parents and educators, and maybe even specific apps with guardrails to allow for experimental spending with small amounts of cash. And it should also be possible for regulators to fight fire with fire: Misleading economic narratives about inflation hedges could be countered by qualified influencers, as with other forms of misinformation.
But for now, people with laser eyes on their profile photos have unwittingly slapped an obvious health warning on their content. If you see those two red dots, steer clear.
Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the EU and France. Previously, he was a reporter for Reuters and Forbes. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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