The laser eyes of the influencers of the crypto community go out

Bloomberg Opinion — There aren’t many positives to be found in the cryptocurrency ecosystem’s downfall. Lots of people have lost money, often those who could least afford this. But a welcome victim is the army of laser-eyed influencers, toxic promoters in what surely should rank as one of the most egregious indirect advertising manias in financial history. What comes next should be a healthier approach to consumer protection as we move into the age of digital investment.

The simple identifier of laser eyes, a badge of optimism about bitcoin’s path to $100,000 and beyond, at its peak came to adorn the avatars of congressmen, billionaires, sports stars and, of course, hordes of ordinary enthusiasts. currents.

The glow isn’t quite as strong after the last drop, and some were turned off entirely, supposedly in an effort to control damage to their reputations. The Winklevoss twins are now busy promoting their next act as musicians in a cover band called Mars Junction; Elon Musk insists that he never told anyone to buy. And celebrities who once flaunted their NFTs have now removed them.

The real changes will come further down the speculative food chain, as the fuel for viral economic narratives promoting crypto trading among impressionable young consumers, eager to get rich faster than the rest of society, runs out.

The business model of influencers is to accept real dollars in exchange for promoting virtual cash. At one point, YouTubers were being offered $30,000 to promote crypto investments. But those dollars are drying up as trading on the exchanges declines and the initial funding disappears. Even Coinbase Global Inc., with a market capitalization of more than $12 billion, has slashed funding for affiliate marketing, according to Business Insider. Influencers who only a few months ago earned US$40 for each new registration on the platform now receive offers of US$2 or US$3.

Cryptocurrencies and meme stocks have fallen apart as inflation rises.  dfd

Celebrities like Matt Damon and Larry David deserve to be criticized for being in 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, like YouTuber Logan Paul, who was celebrating in front of his 23 million followers the now-collapsed Dink Doink token, a project he said he told the New York Times in May, went “absurdly wrong”, they are clearly eroding the confidence of fans in general.

And as the obvious ignorance of some shills trickles down to their fans, who are sure to tire of constant claims that cryptocurrencies are an “inflation hedge” when they are anything but, more regulatory intervention is likely along with Voluntary crackdowns by TikTok and other social media platforms are not that far off. The accounts of some reality TV stars have been closed. An example of this is the suspension of Jazz and Laurent Correia from Snapchat last year.

This is not about censorship, but about transparency. Jackson Palmer, co-creator of dogecoin, has a general term to describe our world: Griftonomics. Applying it to cryptocurrencies, she says, reveals a network of “bought influencers.” A study by the Dutch financial markets regulator of 150 influencers reaching more than 1 million followers found that only a small fraction, around 1%, did not make money from affiliate projects, many of which remained undisclosed.

The authorities obviously have a role to play in ending the worst excesses. Advertising supervisors in the UK and France have done a decent job of stopping misleading advertising campaigns. Both Kim Kardashian and Floyd Mayweather were sued in January, accused of promoting a digital currency called EthereumMax to investors. Mayweather had already been fined by the United States Securities and Exchange Commission (SEC) in 2018 for promoting coins without disclosing financial interest, while last year Kardashian was reprimanded by the Financial Conduct Authority of the United Kingdom. United for using his fan base to promote “a speculative digital token created a month earlier by unknown developers.”

But there is also an urgent need for more financial and digital literacy. Young people are saddled with debt at an increasingly young age and feel the pressure acutely. There is also a sense that wealth is accumulated through luck (being born into the right generation or family, or backing the right token) and not due to merit. That helps explain why buy-now-pay-later loans have thrived among those struggling to pay them, and why a high percentage of people follow and listen to influencers.

There is a role here for parents and educators, and perhaps even specific apps with security measures to allow 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 disinformation.

But for now, people with laser eyes on their profile pictures have inadvertently put an obvious health warning on their content. If you see those two red dots, stay away.

This note does not necessarily reflect the opinion of the editorial board or of bloomberg lp and its owners.

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