Why the Growing Hate for Crypto Financial Influencers?

Lavish hotels, extravagant vacation homes, piles of cash, dazzling watches and jewelry, high-end supercars, and luxurious yachts — this is the flashy image that financial influencers or finfluencers often project. They present themselves as the epitome of success, a testament to the wealth and luxury that cryptocurrency trading and investment could bring. If you, like me in my early crypto days, found yourself captivated by these financial and crypto YouTube channels, you’re not alone. The allure of such wealth is hard to resist.

However, in this article, we will delve into the potential pitfalls of following advice from these so-called crypto gurus or finfluencers. We’ll explore why buying into their narratives and strategies might just lead to the most detrimental financial decisions you could make. So, let’s embark on this journey to uncover the world of crypto finfluencing and reveal the truth behind the glitz and glamour.

The Allure of Crypto Finfluencers

Let me take you back to the year 2017, my early days in crypto. I was hooked on YouTube, watching video after video from these so-called Crypto Gurus or Finfluencers. They seemed to have it all figured out — promising quick wealth and financial freedom through leverage trading, trading bots, play-to-earn games (if anyone recalls here CryptoKitties), or simple NFT buy and sell. These stories of turning a few hundred dollars into millions were irresistible. I mean, who wouldn’t want a piece of that pie?

At the time, I had only a thousand dollars or so in my bank, working full-time as a community manager for a start-up crypto exchange company. I had no means to fully engage in leverage trading or NFT purchases, so I decided to do some research first before jumping right in and investing my only remaining savings, and here’s what I found:

The reality of crypto trading is far from the glamorous success stories often portrayed by influencers. According to statistics, about 95% of all traders fail. This doesn’t mean you have a 95% chance of failure, but rather that for every hundred traders entering the market, only five make a profit. Even among those who do succeed, the journey is fraught with challenges and requires a deep understanding of market dynamics, risk management, and emotional discipline.

When it comes to NFTs, the picture isn’t much rosier. Data from the OpenSea marketplace indicates that only 28.5% of NFTs purchased during the minting process result in a profit when they are sold. This means that more than 70% of NFT buyers end up losing money or breaking even at best. The NFT market is highly speculative, and success often depends on timing, market trends, and sometimes sheer luck.

These statistics were a wake-up call for me. They highlighted the importance of doing thorough research and understanding the risks before diving into the world of crypto and NFTs. It’s easy to get swept up in the hype, but the reality is that the odds are stacked against you.

But did that stop me? Oh, no! I was like a moth drawn to the flame of these crypto Gurus or finfluencers. I ended up buying and trading some tokens, on the start-up crypto platform where I was working to get the hang of it. You could say I was conducting my little experiment. And the result? Well, let’s just say my initial investment disappeared faster than cookies at a kids’ party.

Clickbait and Sensationalism

I remember the feeling, that rush while staring at those flashy thumbnails and sensational titles that are not just there for show, but instead, are meticulously designed to reel you in. Phrases like “This Token Will 1000x very soon!” or “Urgent: Buy Now Before It’s Too Late!” are all too common. These tactics are designed to create a sense of urgency and FOMO (fear of missing out).

Well-known figures like Ben Armstrong (BitBoy Crypto) have been known to use them. Ben Armstrong used sensational tactics to promote $DISTX as a potential 1000x small-cap crypto project. However, the project ended up exit scamming, highlighting the grave risks of following such advice without thorough research. This is merely one example among numerous projects that he promoted, which ultimately turned out to be either outright scams, abandoned, or their value plummeted to the point of worthlessness.

Transitioning from Armstrong’s tactics, another influencer who has made waves in the crypto space is The Moon Carl. He popularized Kasta, a crypto project with questionable tokenomics. A significant portion of its total supply was allocated to private and seed rounds and marketing. This has raised serious concerns about its financial structure and suggested a potential imbalance in token distribution and an overemphasis on hype over substance.

Since The Moon Carl promoted Kasta, the token’s value has experienced a significant downturn. $KASTA is (at the time of writing) valued at a mere $0.01564, a stark contrast to its initial coin offering (ICO) price. This represents a staggering 98% decrease in value from its inception in January 2022 to September 2023, clearly showing the token’s drastic depreciation and further emphasizing the volatile nature of these investments.

Even mainstream celebrities like Kim Kardashian, Paul Pierce, and Floyd Mayweather fell into the trap of promoting cryptocurrencies most notably EthereumMax. Their promotions led to a significant increase in trading volume but also resulted in a class action lawsuit. Kim Kardashian had to settle with the SEC, agreeing to pay a hefty $1.26 million fine for promoting the project.

Regarding Paul Pierce, he was accused of insider trading in the crypto lawsuit. The SEC sued Pierce in February for failing to disclose that he received $244,000 from EMAX to promote the cryptocurrency on social media. In 2021, Pierce tweeted that he was “in for the long haul” on EMAX and then sold millions of the tokens just three days later. Pierce settled and paid $1.4 million in fines.

As for Floyd Mayweather, he was also named in the lawsuit along with Paul Pierce and other celebrities. Mayweather promoted the EMAX tokens at a boxing match and at a Bitcoin conference in June 2021.

Questionable Market Predictions

Oh, the predictions! Influencers would confidently declare that a particular cryptocurrency was about to skyrocket. I recall one instance where I invested close to $2,000 in Axie Infinity, money I had saved from my freelance job at a start-up crypto company that I mentioned earlier. I was swayed by the hype and the promise of high returns. However, to my dismay, the value of the Axie Infinity ($AXS) token plummeted by around 95% from its all-time high in November of 2021.

This experience was a tough pill to swallow, especially given my role as a community manager at the time. I’ve learned that most predictions are just mere speculations and are no better than my own.

Just a few months after the Axie Infinity disaster, I remember the buzz around Squid Token and Beast Masters, both of which turned out to be scams. These projects were heavily promoted by these YouTube GameFi finfluencers, only to collapse almost overnight. The Squid Token, inspired by the popular Netflix series Squid Game, and Beast Masters, which vanished without a trace after a successful NFT pre-sale, served as a stark reminder of the risks involved.

“Not Financial Advice” Disclaimer

This phrase, a staple among YouTube finfluencers, serves as a legal safeguard for them but can be misleading for viewers. Despite this warning, many, including myself, have taken their advice as gospel, thinking, “They must know what they’re talking about.” This false sense of security can lead to unwise financial decisions.

Take Graham Stephan, for instance. I used to listen to him because of his informative financial advice. He’s entertaining and portrays himself as an expert in the field of finance, including crypto. However, he’s no different from other finfluencers who are just trying hard to sell a course. In reality, his understanding of crypto is akin to that of the everyday investor, and it appears he may have hidden motives in promoting these projects. A prime example of this is what happened with FTX, which he promoted to his millions of subscribers

Indeed, Graham Stephan’s promotion of FTX turned out to be a significant misstep. He, along with other finance YouTubers like Kevin Paffrath, Andrei Jikh, Jaspreet Singh, Brian Jung, Jeremy Lefebvre, Tom Nash, Ben Armstrong, and Erika Kullberg, was sued for over a billion dollars over the promotion of FTX. The lawsuit alleges that these influencers, including Stephan, were paid to endorse FTX, which later turned out to be a fraudulent scheme. The influencers allegedly did not disclose the nature and scope of their sponsorships and/or endorsement deals, payments, and compensation. They also allegedly did not conduct adequate due diligence. This resulted in a significant loss for many investors who followed their advice.

Adding to the controversy, Stephan recently promoted another fintech startup, Yotta, which also turned out to be a scam. This serves as a stark reminder that the “Not Financial Advice” disclaimer is not just a phrase, but a warning that these influencers’ advice should be taken with a grain of caution. It’s a testament to the importance of personal research and decision-making in the volatile world of crypto investments.

Conclusion

While crypto finfluencers can provide engaging and potentially informative content, it’s vital to view their advice with a discerning eye. The seduction of swift riches, coupled with sensationalist tactics, dubious forecasts, and questionable partnerships, can steer one towards ill-advised financial choices.

It’s important to remember the value of personal research, professional counsel, and a healthy dose of skepticism when navigating the treacherous waters of cryptocurrency.

Moreover, it’s worth considering that your own instincts and decision-making abilities could potentially yield better results. After all, personal intuition, backed by thorough research and understanding, may well outperform the speculative predictions of these finfluencers. Trusting oneself can often be the most reliable strategy in the unpredictable world of cryptocurrency.