There aren’t many silver linings in the cryptocurrency crash. People lost money, often those who could least afford it. But a welcome victim is the army of laser-eyed social media “influencers,” toxic promoters in what must surely rank as one of the most egregious product placement manias in financial history. What comes next should be a healthier focus on consumer protection in the age of digital investing.
Lights out for Crypto’s laser-eyed crooks
The simple identifier of a pair of laser eyes — a sign of optimism that Bitcoin was headed for $100,000 and beyond — at its peak adorned the avatars of congresswomen, billionaires, sports stars and, of course, hordes of grassroots crypto enthusiasts.
The lasers don’t shine as brightly after the latest rout in cryptoland, with some going completely dark, presumably in an effort to control reputation damage. The Winklevoss twins are now busy promoting their next act as musicians in a cover band called Mars Junction; Elon Musk insists he never told anyone to buy. And celebrities who once flaunted their non-fungible tokens have now taken them down.
The real changes will happen further 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 faster than the rest of society. .
The business model of influencers is to take real money in exchange for promoting virtual money. At one point, YouTubers were offered $30,000 to promote crypto-related investments. But those dollars are drying up as exchange trading dwindles and startup funding disappears. Even Coinbase Global Inc., with a market cap of over $12 billion, has cut affiliate marketing fees, according to Business Insider. Influencers who just a few months ago earned $40 for every new signup to the platform are now offered $2-3.
Celebrities such as Matt Damon and Larry David deserve insults 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 — like YouTuber Logan Paul, a cheerleader to his 23 million subscribers for the collapsed token Dink Doink, a project he told New York Times in May that he was “absurdly false” – are clearly eroding the trust of fans in general.
And as the blatant ignorance of some crypto accomplices trickles down to their fans – who will surely tire of the constant claims that crypto is an “inflation hedge” when it is anything but – more Regulatory interventions as well as willful crackdowns on TikTok and other social media platforms are likely not far behind. The accounts of some reality TV stars have been shut down, with Snapchat suspending Jazz and Laurent Correia last year.
It’s not about censorship, it’s about transparency. Jackson Palmer, co-creator of Dogecoin, has an umbrella term to describe our world: Griftonomics. Applying it to crypto, he says, reveals a network of “bought influencers.” A study by the Dutch financial markets regulator of 150 influencers covering more than one million followers found that only a tiny fraction – around 1% – did not earn money from affiliate projects. many of which have not been disclosed.
The authorities obviously have a role to play in cleaning up the worst excesses. Advertising supervisors in the UK and France have done a decent job of stopping misleading advertising campaigns. Kim Kardashian and Floyd Mayweather were both sued in January, accused of promoting a digital currency called EthereumMax to investors. Mayweather was previously fined by the US Securities and Exchange Commission in 2018 for touting coins without disclosing a financial interest, while last year Kardashian was reprimanded by the UK’s Financial Conduct Authority. United for using its fanbase to promote “a speculative digital token created a month prior 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 early age and feel the pressure acutely. There’s also a sense that wealth accumulates through luck – born into the right generation or in the right family, or by backing the right token – rather than due to merit. This helps explain why Buy-Now-Pay-Later loans have flourished among those struggling to repay them, and why a high percentage of people follow and listen to influencers.
There’s a role here for parents and educators, and maybe even specific apps with safeguards to allow for experimental spending with small amounts of money. And it should also be possible for regulators to fight fire with fire: misleading economic narratives about inflation hedges could be countered by trained influencers, as with other forms of misinformation.
But for now, people with laser eyes in their profile pictures have unwittingly slapped an obvious health warning on their content. If you see these two red dots, steer clear.
More from this writer and others on Bloomberg Opinion:
Crypto isn’t too big to fail, even with the help of FTX: Lionel Laurent
• The next big thing in AI is “fake” data: Parmy Olson
Bitcoin Can Serve Many Masters in Ukraine War: Tim Culpan
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. Previously, he was a reporter for Reuters and Forbes.
More stories like this are available at bloomberg.com/opinion