In the last two years, especially during the pandemic, there has been a boom in financial influencers, or as they are called finfluencers. With the insane growth of the crypto market, many wanted to ‘cash in’, because when something on the internet experiences ‘hype’, there are clicks, and ultimately some profit from those clicks. A large number of such rather unverified ‘advisors’ have appeared, and it could be said that they have occupied social networks, primarily TikTok and YouTube.
Additionally, the significant growth of the crypto market and the large profits of crypto companies have also captivated various celebrities and actors, leading many to appear in crypto advertisements promising ‘mountains and valleys’ and boasting that they too are now in the crypto world. How these well-known figures fared and how much legitimacy they had while also ‘hyping’ cryptocurrencies and NFTs was best demonstrated by the creators of the cult series South Park, in the episode ‘ The Streaming Wars‘, where they brilliantly exposed celebrities who made fools of themselves by elevating crypto and NFTs to the skies, without any real backing.
The King of Finfluencers
And then there is Elon Musk, perhaps the most famous finfluencer, who has driven markets crazy with his cryptic tweets over the past two years. First, the cryptocurrency Doge was going ‘to the moon‘, according to the owner of Tesla, and then he boosted the rise of GameStop shares when he tweeted ‘Gamestonk‘, after which many rushed to buy GameStop shares, which large hedge funds were ‘shorting’.
However, this year Musk is silent. Many other finfluencers are silent too, and there is no trace of the famous ones, nor of crypto advertisements. Currently, it is not the time to give financial advice as the brutal year of 2022 has destroyed the large profits that individual investors made over the last two years.
Simply put, as stocks plummet and the crypto winter deepens, markets have become less susceptible to the ‘touch’ of finfluencers. Many of the biggest market icons like Musk, Cathie Wood from ARK Invest, and SPAC king Chamath Palihapitiya have gone quiet this year, while some finfluencers are still trying to reach their audience in this bear market.
One of them is John Eringman, a financial content creator who shares market wisdom on TikTok for his 1.3 million followers.
– Engagement has dropped since the market peak in November 2021. Not only have views fallen, but revenue streams have also halved. The year 2021 was the biggest year I had. This year and next year will be much less lucrative – says Eringman.
Eringman believes that financial influencers will remain on social media, but he says that the bear market has been tough for many, including himself. Professor Paul Delfabber, who has researched the psychological motivation of crypto traders, believes that investors are simply oversensitive to the suggestions of finfluencers when the market is falling, i.e., when a bear market occurs.
– A bunch of new small investors and many on social media accept Musk’s messages because they know that everything he touches turns to gold – explains Professor Delfabber, adding that it is now harder to convince people to invest due to the bear market.
And that is true, Elon and other finfluencers grew during the bull market, and probably everyone knows someone who entered crypto, NFTs, stocks, or something else in the last two years. The bull market simply sucks people in, and many see an opportunity for quick and easy profit here.
A Gentle Cooling
LunarCrush, an analytical site that tracks mentions of stocks and cryptocurrencies on social media, shows reduced social engagement for some of the most popular stocks among small investors since the S&P 500 hit its lowest level in June, marking its worst first half of the year since 1970. Engagement with Tesla, one of the most talked-about stocks on social media, has fallen from the heights seen earlier this year. Since mid-July, posts about Tesla have exceeded 100 million views, while last year that number hovered around 240 million views.
Make Room for Bots
As finfluencers retreat in the face of this year’s declining market, there is a void filled by huge amounts of spam, explains Jon Farjo, LunarCrush’s chief product officer.
– Spam activities on social media, which can be posted by people or bots, are usually attempts to influence market sentiment or the buying and selling activities of a particular stock or crypto asset. This can vary from users pretending to be someone else – like the rise of fake posts by Vitalik Buterin before the Ethereum merger – or any other activity considered an attempt to artificially inflate the price of a stock or crypto token – says Farjo.
Spam is the fastest-growing metric tracked on LunarCrush’s website, Farjo said, adding that it has increased exponentially since they started tracking it.
A Harvard study showed that if a spammer sells a stock a few days after heavily promoting it on social media, they will achieve a return of 4.29 percent. On the other hand, people who buy stocks pumped by spam schemes and sell them two days later will lose an average of 5.5 percent on the trade, not including brokerage fees.
And the spread of spam as a new form of market influence could be a permanent reality of 2022, experts say.
However, this does not mean that finfluencers will be completely erased, as there are always naives who love to hear a tip from someone they trust. Listen, I have a tip….
