The Elon Effect Shows How Thought Leaders Shape the FinTech Market

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The power of influencers to affect public perception and therefore cause alterations in the value of a product, service, asset or currency has increased to the point where they can s collapse or elevate entire markets with their content and catches.

The Elon Effect

In 2021, Elon Musk could raise the price of the famous memecoin Dogecoin (DOGE) by 50% with a single tweet. He still has a lot of power in the cryptocurrency markets, and several people in the cryptocurrency and traditional finance world have accused Musk of manipulating the cryptocurrency market with just a few tweets.

Other popular influencers might cause similar effects via social media posts or promotional videos. But why do they have so much power? Well, it all depends on the power of influencer marketing; research shows that around 80% of consumers are more likely to buy products promoted by influencers than ads.

Related: Removing Crypto Influencers Is One Step That Would Help Heal The Market

In the case of the crypto market, digital advertising has been partially irrelevant over the years due to several factors, the main one being that Google, Twitter and other social media platforms had banned crypto ads in the past. Therefore, promoting coins/tokens via influencers was the main marketing alternative for many cryptocurrency projects.

Take FTX, for example, one of the top three crypto exchanges. It went from being a nearly $40 billion crypto powerhouse to filing for bankruptcy. Its founder, Sam Bankman-Fried, was seen posting strange cryptic messages on Twitter following the collapse of FTX. Why? Who knows. But that leaves users, investors, and even FTX employees confused.

With these shady and unclear messages going on, it only adds more fuel to speculation and all sorts of theories, which only worsens the current scenario for the cryptocurrency industry.

Why you shouldn’t follow the advice of influencers

The first and most important problem? The views and opinions of influencers are not always absolute or necessarily correct.

Moreover, some of these influencers may not even have knowledge or insight into the product/asset/coin they are promoting. Such was the case with reality TV star Kim Kardashian, who received $250,000 for promoting EthereumMax, a contract-enabled smart platform for building decentralized applications. Kardashian then had to pay $1.26 million in penalties, restitution and interest to the United States Securities and Exchange Commission.

This case is a reminder that when celebrities or influencers endorse investment opportunities, including crypto asset securities, it does not mean that these investment products are suitable for all investors,” said the chairman of the SEC, Gary Gensler, in a statement at the time.

This raises an obvious question that a lot of people don’t seem to ask: Do you really have to buy something from a reality TV star who has never had anything to do with cryptocurrencies?

Another issue with influencers that needs to be mentioned is that many of them can violate advertising rules and mislead investors with shady products/assets. In the case of India, crypto influencers are responsible for 92% of crypto ad violations.

The solution to these problems: DYOR always does its own research. It’s understandable that not everyone has time to investigate a project or currency before investing in it, but it’s also not reasonable to blindly follow the advice of crypto influencers. Investors should take the time to personally check out a potential investment vehicle and find answers to key questions that concern them.

The Power of Opinion Leaders in Today’s Markets

Influencers have been heavily criticized for pumping or dumping cryptocurrencies in which they hold market position. For example, in 2017, the late John McAfee admitted to charging crypto projects over $100,000 per tweet to promote their initial coin offerings, as well as taking a sizable percentage of their token supplies.

1/ Let’s review all the direct scams Bitboy has worked with in the past. Just in case you forgot, here’s the flyer with how much he charges.

I received it a while ago pretending to be a project interested in a promotion.pic.twitter.com/FkC9HUDGsc

— ZachXBT (@zachxbt) January 3, 2022

Popular crypto influencer Ben Armstrong aka BitBoy Crypto also admitted to receiving payments from crypto projects to promote them on his YouTube channel for years, leading many of his viewers to suffer huge losses.

Love or hate influencers, they need to be regulated

Other examples could be mentioned here. But the main point is that promoting a cryptocurrency project or a coin almost feels like a synonym for a scam in today’s crypto market.

Therefore, it seems sensible for countries and jurisdictions around the world to establish appropriate guidelines to regulate the level of influence of opinion leaders. A good example of influencer regulation comes from Spain. The Mediterranean country has established a set of rules that all influencers must follow before promoting cryptocurrencies. Otherwise, they risk fines of up to 300,000 euros (just over $316,000).

Related: Potential US ban reminds influencers to get rid of TikTok

Influencers have a lot of power in the crypto market: with just one social media post, they can deter or catapult an entire product or coin. And the bigger the influencer, the greater their effect on the market. Therefore, they must be held accountable for their words and actions. If it takes formal regulation for this to happen, so be it.

Vladimir Gorbunov is the founder and CEO of Choise.com. He previously worked as CEO of Workle, an internet-based sales and service platform. He graduated from Finlandia University with a degree in International Business.

This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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