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The cryptocurrency market is very young, and its history spans a little over 10 years. However, to claim that it is as decentralized as cryptocurrencies would be an exaggeration.
For example, about 64% of all bitcoins are held in 16,000 wallets (0.06% of their total). Just over 13% of all mined coins are on the balance sheet of just 97 bitcoin addresses. The situation is similar with other cryptocurrencies.
This position in the market makes it easy to manipulate. This is the main reason for such a high volatility of cryptocurrencies. At the same time, the cryptocurrency community brings together millions of users around the world. And, as in any other group with similar interests, there are bright opinion leaders here.
It often happens that a banal remark on a social network or a mention of some “coin” from the lips of a person significant to the community leads to a sharp rise in the value of this cryptocurrency. Or to the exact opposite situation – to its rapid depreciation.
We suggest recalling real cases of voluntary or involuntary influence of celebrities on the value of digital money. Let’s try to figure out – is this influence really so powerful? Or are we dealing with a typical stereotype? What is it – cause or effect?
How Elon Musk “raised” bitcoin by 20% in a day
A very recent example deserves the first mention. On Friday morning, January 29, Tesla owner Elon Musk added the hashtag #bitcoin on his Twitter page, accompanied by a short message:
“Looking back, it was inevitable.”
Many of the subscribers – and the businessman has more than 44 million of them – decided that these two events are interconnected. And on the same day, the price of bitcoin rose by almost 20%.
In fairness, it’s worth recognizing: with the help of social networks, Musk influences not only the value of cryptocurrencies. At the beginning of this year – more precisely, on January 7 – he posted a short message on the same Twitter:
After this publication, the shares of an unknown company Signal Advance rose by 5 100%. And an encouraging statement about the game Cyberpunk 2077 led to a 19% increase in the shares of its developer, the Polish company CD Project.
What do scientists think?
Back in 2018, a group of researchers at the Stevens School of Business conducted a curious analysis of the impact of comments on the Internet on the price of bitcoin. Scientists processed 3.5 million Twitter posts and comments from users of the largest cryptoforum BitcoinTalk in 2 years. And here are some interesting facts:
· Any comments from users who mentioned cryptocurrencies very often had almost no effect on its value.
On the contrary, the rare statements of people who almost never mentioned digital money before, led to an increase in their value by dozens of times.
How to explain such an incredible result? According to researchers, crypto investors traditionally consider “silent people” to be those who actually control the price of bitcoin. And “talkers” (those who talk too much about cryptocurrency) are viewed as users simply trying to create a hype on a hot topic.
Another group of analysts studied in detail more than 1 million tweets from about 100 English-speaking celebrities from 2018-2020. As a result, it turned out that the frequency of mentions of any cryptocurrency increases after its value changes. It turns out that it is not the opinion that influences the price change at all? Is it really the other way around?
Not only the stars affect the price of the crypto
But here’s the fun part! Not only celebrities, but also a large number of ordinary users can have a powerful impact on the value of a particular cryptocurrency. By coordinating their efforts, they can even reverse the global trend!
So, on January 29, the Dogecoin cryptocurrency increased in price by 10 times in a day. The rapid rise of this coin began after the call to buy Dogecoin, voiced in the Reddit community r/SatoshiStreetBets, which has 180,000 users.
This achievement far exceeded the scale of Elon Musk’s “ventriloquistic” abilities. A year earlier – after his tweet regarding the prospects of using Dogecoin as a global currency – the coin rose “only” by 17%.
The dark side of the issue
When famous and authoritative people mention cryptocurrency on their own initiative, this is one thing. But it’s completely different when celebrities are attracted to advertising crypto projects on a paid basis. Such projects often turn out to be fraudulent.
For example, in the US 2 years ago, the SEC fined boxing champion Floyd Mayweather and famous rapper DJ Khaled several hundred thousand dollars for advertising the Centra Tech project. The regulator considered this scheme fraudulent. And the final losses of investors amounted to more than $32 million.
A similar fate befell Steven Seagal, who was fined $314,000 by the SEC for advertising the Bitcoiin2Gen ICO. Of course, such cases do not mean at all that the mentioned celebrities deliberately misled the admirers of their talent. Such gigantic fines have become possible due to the peculiarities of US legislation. According to the laws of this country, an ICO is equated to an IPO, i.e., cryptocurrency tokens are legally similar to securities.
But, for example, in Russia the situation is different. So, Olga Buzova, Valery Meladze, Nikolai Baskov or Anfisa Chekhova did not suffer any punishment (perhaps, with the exception of moral damage to their own reputation) for advertising the sensational Cashbury pyramid.
From all of the above, one conclusion suggests itself – you should not focus on calls for the purchase of cryptoassets, even when legendary stars of show business, sports or business convince you of this. At the very least, it is advisable to follow their advice only after a detailed preliminary study of all the subtleties of the issue.
As practice shows, celebrities themselves often do not understand what exactly they are promoting to their readership. And due to the fact that today the whole world is at arm’s length due to the rapid development of Internet technologies, millions of people on the planet listen to their words.
If the cryptocurrency does carry some value, its value will rise sooner or later – and without mentioning it on Facebook or Twitter by some celebrity influencer.
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