Celebrity Crypto Endorsements: Should You Trust Financial Advice from Stars?

Imagine scrolling through your social media feed and seeing your favorite celebrity endorsing a new cryptocurrency. Exciting, right? A recent poll, however, shines a light on a potentially risky trend: many retail investors are taking crypto advice from celebrities and influencers on social media. But is this really a wise move? Let’s dive into what the data reveals and explore the potential pitfalls of following celebrity crypto endorsements.

Are You Swayed by Celebrity Crypto Shills?

You might be surprised to learn just how much influence celebrities wield in the crypto world. A Morning Consult poll of 2,200 U.S. adults revealed some eye-opening statistics:

• Nearly Half Listen to Celebrities: A significant 45% of current cryptocurrency holders admitted they’d be more inclined to invest in a digital asset if a celebrity publicly backed it. That’s almost half of crypto investors potentially making decisions based on star power!
• Trust in Familiar Faces: Recommendations from family and friends still hold weight, with 75% of crypto investors saying they’d consider investing based on their advice.
• Seeking Professional Guidance: Unsurprisingly, financial advisor recommendations are the most trusted, with 81% of crypto investors valuing their input.

These numbers highlight a crucial point: while professional financial advice remains the gold standard, celebrity endorsements hold considerable sway, especially in the relatively new and often confusing world of cryptocurrency.

The poll also pointed to a specific instance that perfectly illustrates this phenomenon: Kim Kardashian’s Instagram post promoting Ethereum Max (EMAX).

In early June, almost one-third of crypto owners and nearly 20% of all users were aware of Kim Kardashian’s Instagram promotion of the ERC-20 token, Ethereum Max (EMAX). While only a small percentage (3.8%) of those who saw the post actually invested in EMAX afterward, this small percentage represented a significant 19% of the entire group of EMAX investors. This demonstrates the concentrated impact even a seemingly small conversion rate from celebrity endorsements can have.

Ethereum Max [EMAX]: A Cautionary Tale

The story of Ethereum Max (EMAX) is a rollercoaster ride, showcasing the volatile nature of celebrity-endorsed cryptocurrencies. Let’s break down the key events:

The Hype Begins:

• Boxing Ring Buzz: On May 26th, EMAX was announced as the “exclusive cryptocurrency accepted for online ticket purchasing” for the Floyd Mayweather vs. Logan Paul boxing match on June 6th. This association with a high-profile event immediately generated buzz.
• Price Skyrockets: Before the announcement, EMAX was trading at a minuscule $0.00000000073 (nine zeros). However, the boxing event connection fueled a massive price surge, reaching $0.00000085 (six zeros) by June 1st.
• Unbelievable Gains: In just one week, EMAX experienced an astronomical gain of almost 116,000%! Early investors who got in at the right time saw incredible returns.

The Crash:

• Sudden Plunge: The euphoria was short-lived. Within two weeks of peaking, Ethereum Max lost over 99% of its value.
• Kardashian’s Post & The Peak: Around the time of this peak and subsequent crash, Kim Kardashian promoted EMAX to her massive 250 million Instagram followers on June 13th.
• Token Vanishing Act: Shortly after, it was revealed that 50% of the EMAX tokens were effectively gone, further contributing to the price collapse.

The Aftermath:

• Post-Kardashian Pump: Interestingly, before Kardashian’s post went live, EMAX was trading at $0.0000000076 (seven zeros). After the post, by June 14th, it jumped to $0.000000235 (six zeros), a 3,000% gain in less than two days. This highlights the immediate, but often unsustainable, impact of celebrity promotion.
• Downward Trend: Since mid-June, EMAX has been on a downward trend. It recently traded at around $0.000000021 (seven zeros), a 91% drop from its post-Kardashian endorsement highs.

The EMAX story serves as a stark reminder of the extreme volatility and risk associated with many cryptocurrencies, especially those heavily promoted by celebrities without clear financial expertise or disclosures.

Are Crypto Influencers Leading You to Scams?

Financial regulators have taken notice of the growing trend of celebrity and influencer crypto endorsements, and they’re raising serious concerns. Charles Randell, chairman of the U.K.’s Financial Conduct Authority (FCA), described Kardashian’s EMAX Instagram post as potentially the “financial promotion with the biggest audience reach in history.” He further cautioned:

“I can’t say whether this particular token [Ethereum Max] is a scam. But social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some celebrities promote coins that turn out simply not to exist at all.”

Randell’s words highlight the real danger of “pump and dump” schemes, where promoters artificially inflate the price of a token, often through celebrity endorsements, only to sell off their holdings at the peak, leaving unsuspecting investors with significant losses. This is a serious concern in the unregulated corners of the crypto market.

Kim Kardashian isn’t alone in facing scrutiny. Floyd Mayweather and DJ Khaled were previously charged by the U.S. Securities and Exchange Commission (SEC) in 2018 for illegally promoting the Centra initial coin offering (ICO) without disclosing they were paid for the endorsements. This demonstrates that regulators are actively monitoring and taking action against undisclosed and potentially misleading celebrity crypto promotions.

While the SEC has issued warnings about disclosing sponsored ICO and crypto advertisements, the landscape is constantly evolving. Many celebrities are now venturing into promoting their own Non-Fungible Tokens (NFTs) amidst the NFT boom, creating new avenues for potential conflicts of interest and undisclosed promotions.

Key Takeaway: Celebrity endorsements can create hype and excitement around cryptocurrencies, but it’s crucial to remember they are endorsements, not financial advice. Always do your own thorough research and consider advice from qualified financial professionals before investing in any cryptocurrency, regardless of who is promoting it.

Protect Yourself from Crypto Scams: Actionable Tips

• Do Your Own Research (DYOR): Never invest based solely on celebrity hype. Understand the technology, the team behind the project, and the tokenomics before investing.
• Be Skeptical of Guarantees: Promises of guaranteed high returns in crypto are red flags. High returns always come with high risk.
• Look for Transparency: Legitimate crypto projects are usually transparent about their team, roadmap, and technology. Lack of transparency is a warning sign.
• Verify Endorsements: Check if celebrities have disclosed any paid promotion. Undisclosed endorsements are unethical and potentially illegal.
• Start Small: If you’re new to crypto, start with small investments you can afford to lose. Don’t put all your eggs in one basket, especially based on hype.
• Seek Professional Advice: Consult with a qualified financial advisor before making significant crypto investments.

Read More: Social Media Influencer Jay Mazini Indicted for Duping Followers of $2.5M Bitcoin