Influencers and the Financial Market

Influencer credibility took a hit during the pandemic when many lost followers and received backlash over breaking lockdown rules to take supposed ‘business trips' abroad. Now, their activity within the cryptocurrency markets on online social platforms has led people to further doubt their authenticity and honesty towards their followers, meaning they could soon see another blow to their image and position in the digital space.

So, what are influencers doing? To put it simply, a number of public figures have been using their platforms to take advantage of the lack of regulation in the crypto markets and exploit their followers for their own gain. 

Some have been paid large amounts of money to promote certain digital cryptocurrency 'coins’ to persuade their large following to buy the currency in order to raise (‘pump’) its price. The influencer may have also invested in the currency themselves early on, meaning that once the price has been pushed up by their followers’ investments, they can sell their own stake at a higher price to make a profit (‘dumping’). This sell-off results in a price drop often leaving followers out-of-pocket… creating a huge problem when large numbers invest their savings into such schemes based on the influencers’ advice, as they were unaware of their true motivation behind the promotion as many fail to mention the risks of these investments. 

Even those that do add “not financial advice” warnings are still encouraging their followers to buy into the investment they’re promoting through the content. Many people use social media for financial guidance, including almost 50% of teenagers, showing how dangerous this manipulation is as it looks like many followers may continue to trust the cryptocurrencies that the influencers support and encourage across their platforms.

What if the influencers don’t know what they’re doing? Even if they’re not aware, when they’re using their position to manipulate and exploit followers for their own gain, it remains highly unethical and could further damage the already weakened credibility of influencers. Soulja Boy accidentally revealing that he had been paid to promote a token called SaferMars to boost its price was an explicit example of this.

But the news isn’t all negative. Some influencers have been doing their best to help, like YouTuber ‘‘Cody Ko’’ who has brought light to the situation and is trying to make sure more people are more aware so they don’t fall victim to these scams. In addition, no nonsense, self-proclaimed financial popstar Haley Sacks (aka Mrs Dow Jones) is also doing her bit to better educate her followers on solid and safe financial practices. This doesn’t detract from the fact that this has shown the power of influencers, and with social media becoming a bigger part of the financial world, this is something they’ll need to think about when promoting certain products or services on their profiles, especially those where their advice could affect their followers’ financial wellbeing.

In line with this, there are also a number of more official channels seeking to bring financial education into the mainstream – for example CNBC Millennial Money and Refinery29 Money Diaries – helping to educate consumers while they are consuming media during their day-to-day. Amid the influencer scams and vast amounts of financial misinformation circulating on social media, these official media channels could see a rise in their perceived credibility among younger audiences.

What does this mean?

The events of this year in the crypto world and the significant role that influencers have played within them has shown just how much individuals are willing to trust the figures they follow. This provides exciting opportunities for brands interested in working with influencers, but it also highlights the potential risks that such collaborations can present. So, it’s essential to work with those who know the social landscape better than anyone, to spot influencer opportunities and steer clear of potential pitfalls.