- As stocks plummet, the market becomes less susceptible to the Midas touch of ‘finfluencers’.
- Data shows spam activity on social media is on the rise as celebrities and influencers go quiet.
- “You have an army of bots that can cause the same explosion [as Elon Musk]said one cultural anthropologist.
After disrupting markets with a cryptic tweet in 2021, Elon Musk has been largely silent about his investment advice this year.
Tesla’s CEO has pioneered a new role for celebrities as stock pickers, but that’s about to change as profits made by retail investors in two years of the pandemic are crushed by the gloom of 2022, experts say. say.
Simply put, as stocks plummet and the crypto winter deepens, markets are becoming less susceptible to “finfluencer” Midas.
While many of the biggest market icons such as Musk, ARK Invest’s Cathie Wood, and SPAC kingpin Chamath Palihapitiya have either turned the tide or mostly gone silent in the market this year, social media influencers are still making waves around the world. exists in To reach their audience as they navigate the bear market.
“Engagement has been declining since the peak of the market in November 2021. Not only have views declined, but revenue streams have halved,” TikTok told Insider.
Eringman believes that financial industry influencers will remain on social media, but said the bear market crash has been tough on many accounts, including himself.
“2021 was my biggest year. 2022 and 2023 will be much less profitable,” he admitted.
According to Professor Paul Delfabro, who studies the psychological motivations of cryptocurrency traders, investors are less susceptible to these influencer suggestions during a bear market.
“Elon has had a lot of airtime and celebrity exposure at just the right time – hitting a bull market. Heaps of new private investors and a lot of social media are embracing his message.They knows how wealthy he was. He could turn into gold,” Delfabro told an insider.
But it’s hard to convince people of that in a bear market.
Analytical site LunarCrush, which tracks social media mentions of stocks and cryptocurrencies, has seen a surge among retail investors since the S&P 500 hit a low of nearly 3,600 in June, its lowest level in the first half of the year. It shows that social engagement is declining for some of the most popular stocks. Since 1970.
Engagement with Tesla, one of the most talked about stocks on social media, has plummeted from the highs seen earlier this year. As of mid-July, quality interactions on Tesla’s posts are below 100 million per day, compared to his high of 240 million earlier this year.
Tesla stock price mapped against social media engagement.
Courtesy of LunarCrush
And ironically, given Musk’s battle with Twitter over fake accounts on the platform, spammers are scrambling to fill the void.
Tesla’s stock price mapped against social media spam posts.
Courtesy of LunarCrush
make way for bots
As finfluencers retreat in the face of this year’s bear market decline, there’s a void being filled by an enormous amount of spam.
According to LunarCrush chief product officer Jon Farjo, spam activity on social media, which can be posted by humans or bots, typically represents market sentiment or trades related to specific stocks or cryptocurrencies. It tries to influence activity. That ranged from users impersonating others, such as the spike in fake Vitalik Buterin posts ahead of the Ethereum merger, and other activities seen as attempts to artificially drive up the price of stocks and crypto tokens. may reach.
Spam is the fastest-growing metric tracked on the LunarCrush website, Farjo said, and has grown exponentially since it first started tracking it.
A Harvard University study found that spammers could make a 4.29% return if they sold the stock days after it was heavily touted on social media. On the other hand, if a spammer tricked you into buying stock and selling it two days later, you would lose an average of 5.5% on the transaction, excluding brokerage fees.
“This evidence is consistent with the hypothesis that spammers ‘buy low and sell spam high,'” said the study authors.
And the spread of spam as a new form of stock market influence could be a permanent fact in 2022, experts say. Bill Maurer, a cultural anthropologist at the University of California, Irvine, pointed out that the conditions that allowed Musk to rise as a celebrity are the same conditions that favor spammers.
“As trust in the institutions of traditional financial guardians and gatekeepers is greatly eroded, market investors are turning to people like Elon Musk… [It’s] It’s an amplification of non-traditional sources of financial knowledge,” says Maurer.
But that doesn’t mean that fin fluencers are completely wiped out. It’s just that Spam will be another main character in the story for him.
“We’re definitely making more financial characters,” Maurer said. [the market] There’s still that feeling, I’ll introduce you to something that not everyone knows, right? I accept you, and if you follow me, I will lead you to wealth even in this difficult market.
“So I think there is still a place for hacksterism that Musk represents,” he said.
