Recommendations from crypto influencers often lead to financial losses, according to a study conducted by scientists from Indiana University, Harvard Business School, and Texas A&M University. The research indicates that the average accumulated return on positions opened based on signals from crypto influencers on X decreased by 2.24% after 10 days and 6.53% after 30 days.

The study analyzed 36,000 tweets from 180 prominent crypto influencers, covering recommendations for 1,600 assets over a two-year period ending in December 2022.

Short-Term Gains, Long-Term Losses

The profitability of transactions based on these recommendations was 1.83% and 1.57% on the first and second days, respectively. For tokens with small capitalization, a gain of 3.86% was observed a day later. However, these short-term price increases tend to turn negative in the long term.

Expert tweets cause short-term price increases, but the effect becomes negative in the long term.

The influence is most noticeable for posts from those who position themselves as experts and among influencers with a large number of followers. This data may confirm regulators’ concerns that crypto-influencers could be misleading investors.

The Role of Social Media Sentiment

In related research, emojis expressing positive sentiment on social media can predict upward movements in the cryptocurrency market. By buying Bitcoin (BTC) when positive sentiment was detected and selling it the next day, researchers achieved consistent profits, outperforming standard market trends.

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