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A recent study revealed the worrying impact that crypto influencer tweets have on investor returns. Although the short-term effects appear positive, in the long term the losses accumulate quickly, raising questions about the true motives of these individuals.
Crypto Influencers Push Short-Term Prices Higher
Academic research reveals the real impact that crypto influencer tweets have on the market. Attractive gains are observed in the short term, but they often hide painful losses in the long term.
To conduct this analysis, three researchers reviewed 36,000 tweets published by 180 leading crypto influencers, covering over 1,600 cryptocurrencies. The results are surprising: the average return on the day of the tweet reached 1.83%, and for small cryptocurrencies it skyrocketed to 3.86%. The increase continued the next day, with an average return of 1.57%.
Self-proclaimed “experts” with large audiences provoke the strongest market reactions. Machine learning analysis reveals that positive tweets and purchase recommendations amplify these bullish trends. But this enthusiasm doesn't seem to last long.
Behind the euphoria, losses pile up.
Unfortunately for investors, initial gains are quickly replaced by negative returns. After just 10 days and his 30 days, the average cumulative return drops to -2.24% and -6.53%, respectively. Smaller cryptocurrencies will be hit the hardest.
These findings raise questions regarding potential conflicts of interest among influencers. Some may try 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 crypto market only exacerbates these risks.
“Individual investors are most likely to suffer losses because they often lack the necessary expertise to assess the credibility of these influencers.” emphasizes cryptocurrency expert John Doe. “We always recommend doing thorough research before investing”
In summary, this study highlights the dangers of investment advice given by crypto influencers on Twitter. Although the short-term gains are attractive, blindly following their recommendations can lead to big losses in the long run. Regulators and investors would be wise to be wary of these potentially misleading practices in a largely unregulated market.
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Disclaimer
The views, ideas and opinions expressed in this article are solely those of the author and should not be construed as investment advice. Please do your own research before making any investment decisions.
