Benzinga - A fresh study has provided a detailed analysis of the influence of crypto influencers on Twitter, with findings that carry significant implications for investors.
The study by scholars from Indiana University, Harvard Business School, and Texas A&M University meticulously examined approximately 36,000 tweets from 180 prominent crypto-influencers over two years, shedding light on how these social media figures impact cryptocurrency prices.
The study reveals that tweets from crypto-influencers are initially associated with positive returns.
“The mean one-day return for crypto-influencer tweets is 1.83%,” the paper states, adding that “the return rate for small-cap tokens after one day is a notable 3.86%.”
This initial surge in price highlights the significant short-term impact these influencers can have on the market.
However, the research also points to a sobering reality for investors looking for long-term gains. “These tweets are followed by significant negative longer-horizon returns,” the authors report.
Specifically, the study found that the average cumulative returns after 10 days were -2.24%, and this trend worsened over time, reaching -6.53% after 30 days.
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Why It Matters: The paper emphasizes, “Our results indicate that crypto-influencers’ tweets generate minimal long-term investment value.”
The scholars highlight that these effects are particularly pronounced for influencers who proclaim themselves as “crypto experts” and have a substantial follower base.
The study underscores the potential for conflicts of interest, with influencers possibly promoting cryptocurrencies for personal gain.
“Our evidence supports ongoing regulatory concerns regarding investors being misled by social media influencers,” the authors caution.
In their analysis, the researchers utilized machine-learning methods to classify tweets and found that the pattern of results was stronger when the tweets had a more positive sentiment or were retweeted extensively.
This reinforces the idea that the influence of social media on cryptocurrency markets is both powerful and complex. However, the study did not look at individual cryptocurrencies. Particularly meme coins, such as Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) and their copycats are
What’s Next: The findings of this study are especially relevant as the industry looks forward to Benzinga’s Future of Digital Assets event on November 19.
This event will provide a platform to discuss the evolving landscape of digital assets, the role of social media influencers, and the regulatory challenges that come with it.
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