Social media influencers are marketing manna, coveted for their highly engaged audience who hang on their every word. Sites such as Tomoson and Meltwater link brands with influencers who are eager to spread the word – for a fee. In the cryptocurrency space, however, where influential figures can send coins soaring via a single tweet, the practice is controversial. A number of prominent individuals now stand accused of promoting pump and dumps.
The Price of a Tweet
Cryptocurrency traders, who dispense advice which newcomers gratefully lap up, don’t give away their skills for free. They earn something in return, from buying their recommended picks before these tips are shared, and also via referral links to exchanges. These practices are at least transparent, and few would take issue with a cryptocurrency influencer profiting from their own knowledge. But what about influencers who do little more than shill a coin before sitting back and watching the carnage unfold?
One figure whose name regularly crops up when pump and dumps are mentioned is John McAfee. The maverick programmer and playboy has been a vocal entrant to the world of cryptocurrency and he’s been quick to spot its potential. Specifically, he’s been swift to spot its potential for lining his pockets. With a Twitter audience of over half a million hanging on his every word, he’s taken to pumping altcoins with aplomb. Telegram trading groups now encourage followers to activate McAfee tweet alerts so they’re ready to pile into the next coin he recommends.
The Dark Art of Social Marketing
Social media influencers are meant to disclose when they’re being paid to promote a product or service; numerous celebrities have run into trouble after failing to do so. The cryptocurrency world is murkier, however, exacerbated by its village-like feel, in which everyone seems to know everyone, and exchanging favors are all part of doing business. With influencers taking payment in cryptocurrency, transparency is all but impossible. Many thought leaders are happy to enter into such arrangements, but a handful have demurred, claiming to have turned down offers of $10,000 or more to shill tokens and ICOs.
Most influencers aren’t as brazen as McAfee, whose huge follower count and exhortations to buy trigger frenzies that cause small coins to soar before slumping almost as fast. Things reached farcical levels on Wednesday when the anti-virus software tycoon’s “Coin of the week” tweet was replaced by a flurry of tweets in as many minutes shilling various coins, all of which experienced flash pumps.
The last on the list, before McAfee regained control of his allegedly hacked account, was ripple, accompanied by the promise that it would soon be coming to Coinbase. It is presumably no coincidence that ripple then rose 8%, overtaking bitcoin cash to become the third largest cryptocurrency, with 24-hour trading volume exceeding ethereum.
With Great Power Comes Great Responsibility
Even when they’re not trying to manipulate markets, cryptocurrency influencers can unwittingly cause prices to fluctuate. This is especially true with coins that are synonymous with a single developer, such as litecoin and ethereum. Both projects’ leads, Vitalik Buterin and Charlie Lee, carry great weight on Twitter. Even a passing recommendation, such as Buterin mentioning Omisego or Lee praising Decred, has a significant short-term impact on prices. Morbidly, the untimely death of either figure would dramatically affect the markets. In fact, fake news of Vitalik Buterin’s death fleetingly did just that earlier this year.
If influencers such as John McAfee are to be taken at their word, they are simply trying to raise awareness of promising cryptocurrencies. But even so, their actions inspire copycat scammers. McAfee has had to distance himself from numerous fake accounts ran by scammers seeking as much as 25 BTC to shill a coin. In the intertwined world of cryptocurrency, eliminating conflicts of interest and the power of personalities seems an impossible ask. Thanks to its market share and decentralized nature, bitcoin is largely immune from pump and dumps. For every other cryptocurrency, however, it’s open season, and there’s no shortage of influencers lining up to take aim.