1 Introduction

Accounting research has long examined influencers’ incentives to disinform and the degree to which investors internalize disinformation.Footnote 1 In equity markets, for example, studies have examined managers’ incentives to bias financial reports to alter the market’s valuation of the firm (Fischer and Verrecchia 2000) or to conceal private control benefits (e.g., Leuz et al. 2003). Researchers in these settings typically assume that investors are rational (e.g., Shivakumar 2000; Louis 2004; Lee et al. 2006), consider costly information (e.g., Blankespoor et al. 2020), and can debias misleading numbers (e.g., Chiang et al. 2019) and impose reputation costs on the influencer (e.g., Jo et al. 2007; Macey 2010).

Addressing similar issues but in a novel context, Merkley et al. (2023) examine incentives for self-proclaimed cryptocurrency experts to recommend digital coins on Twitter (now X) and the digital coin price effects from these disclosures. They posit that investors might value advice from these self-proclaimed experts to identify when to buy or sell cryptocurrencies, particularly due to the high levels of information asymmetry in this market. They caveat, however, that investors might recognize influencers’ conflicts of interest, presumably damping price impact. Further, investors might impose reputational costs.

Merkley et al. (2023) test for market effects by primarily examining short-window coin price responses to Tweets issued by a set of most prominent influencers in 2021 and 2022. They report positive short window returns and higher trading volume associated with these Tweets, particularly for smaller cap coins and for Tweets issued by self-described coin experts. They also report evidence of subsequent returns declines, which they suggest is consistent with the notion that crypto-influencers, on average, provide unprofitable longer-term investment advice. They infer that this may be consistent with but is not necessarily conclusive regarding influencers being incentivized by pump-and-dump-schemes.

While the authors’ conclusions are plausible, the analysis could offer broader and more comprehensive insights if it considered the social psychology underlying the selection process that draws many influencers and investors into crypto markets. Such an analysis would allow researchers to consider more incentives and behavioral expectations, which could predict alternative coin price patterns. These expectations could be derived, for example, by considering how social identity (e.g., Tajfel 1974) influences some investors’ engagement in the crypto markets because it directly affects personal utility (e.g., Akerlof and Kranton 2000).

In his seminal paper, Tajfel (1974) states that an individual’s self-definition can be restated in terms of that person’s social identity; an individual strives to achieve a satisfactory concept or image of themselves. One important contributor to an individual’s self-definition is being a member of numerous social groups, and this membership can contribute, positively or negatively, to the self-image. According to Tajfel (1974), social identity entails categorization of people into groups, identifying oneself with one or more groups, and internalizing social identity benefits from perceiving superiority to other groups, among other things.

Akerlof and Kranton (2000) economically model the utility from one’s sense of social identity. They posit that economic actors weigh societal expectations of prescribed behaviors, based on how they perceive to be socially categorized, when considering payoffs from different actions by themselves and others. Violating the prescriptions evokes anxiety and discomfort in oneself and others. Therefore, identity changes the payoffs from different actions. Importantly, for the context of this discussion, Akerlof and Kranton (2000) suggest that identity can explain behavior that appears detrimental, maladaptive, or even self-destructive.Footnote 2 In the context of crypto markets, it may help explain selection on a potentially reckless or more vulnerable investor type.Footnote 3 Understanding this can also help explain how crypto influencers can develop lucrative opportunities, beyond pump and dump schemes, that exploit those who choose to invest.

2 The social-psychological need for social identity

Social psychologists have long documented that a need for self-identity drives human behavior and that social cohort affiliation largely determines self-identity.

Greenaway et al. (2016) define a psychological need as a “drive that prompts an individual to achieve a particular goal or state of being. This means that having one’s needs met produces psychological fulfilment and closure, whereas having one’s needs thwarted has negative psychological consequences.” Rosenberg (1986) defines self-concept as the “totality of an individual’s thoughts and feelings with reference to self as an object.” Rosenberg (1989) describes it as a major component of individual cognition, a source of psychological stress and conflict, and, importantly for this discussion, both a social product and a social force.

Owens and Samblanet (2013) state that identity is a means by which individuals or groups categorize themselves and present themselves to the world. Identity can be thus broadly defined as categories people use to specify who they are and to locate themselves relative to other people. Identity can imply both a distinctiveness (I am not like them) and a sameness as others (I am like them). Everett et al. (2015) suggest that when individuals categorize themselves as group members, the ingroup becomes integrated with the self and individuals come to recognize the characteristics of the ingroup as representing part of themselves. Further, they state that “social identity is integral to an individual’s sense of self, and this self-categorization process have a number of cognitive, affective, and evaluative dimensions that make it such a central part of social life.” Citing experimental evidence from Spears et al. (1997),Footnote 4 Doosje et al. (1995),Footnote 5 and Tropp and Wright (1999),Footnote 6 Everett et al. (2015) state that those who identify strongly with a group are more likely to think of themselves as ingroup members, to remain committed to their ingroup when threatened, and to be concerned about how their group is treated relative to other groups. Identification with one’s group therefore motivates individuals to distinguish their group from others to attain and preserve positive collective self-esteem.

Research also indicates that individuals quickly internalize the benefits (or costs) of social cohort inclusion (exclusion). Greenaway et al. (2016), for example, report experimental evidence of improvements in psychological need, as indicated by lower participant scores of perceived psychological depression, when participants are granted access to new social identity cohorts. Twenge et al. (2001) report that social exclusion leads to an increase in aggression. This may be because MacDonald and Leary (2005) find magnetic resonance imaging evidence that social exclusion induces pain along similar brain pathways as that of physical pain.

Collectively, the social psychology literature consistently articulates that individuals are powerfully driven to seek and internalize cohort identity. This helps explain why, for example fans’ passionate allegiance to sports teams (e.g., Rees et al. 2015) and entertainers (e.g., Lacasa et al. 2017). It also helps explain passionate allegiance to maladaptive cohorts and belief systems, such as gangs (e.g., Lauger 2020), terrorist organizations (e.g., Bélanger et al. 2014),Footnote 7conspiracy theory cohorts (e.g., Klepper 2024),Footnote 8 and cults (e.g., Feldmann and Johnson 1995). These latter affiliations likely connect on what Deaux et al. (1995) consider a stigma identity affiliation.Footnote 9

2.1 Self identity and cults

Langone (1986) describes a cult as a group or movement exhibiting great or excessive devotion or dedication to some person, idea, or thing and employing manipulative techniques of persuasion and control designed to advance the goals of the group. This affiliation typically harms the members, their families, or the community. Langone (1986) describes common manipulation techniques that help reinforce social identity that include isolation from former friends and family, group pressures, information management, suspension of individuality or critical judgment, promotion of total dependency on the group, and the systematic cultivation of fear. Feldmann and Johnson (1995) note that membership in a cult can provide identity or belonging for those personalities who have a broken sense of identity, or self-pathology, due to life experiences.

A cult is inherently a label or assessment that can be applied to any group that exhibits similar characteristics. While the label tends to have negative connotations, it is used here to suggest a group with very strong bonds of social identity and oft-maladaptive group norms. Participants within the group typically self-select, and membership exploits those who tend to be vulnerable.

3 Crypto cohorts and social identity

Crypto trading is globalFootnote 10 and has been adopted as a legal tender in El Salvador and the Central African Republic (Alsancak 2022). Despite its widespread use and popularity, however, crypto investment seems to select on certain characteristics and evolve sub communities that further exploit social identity needs. Here we discuss the type of investors who pursue crypto investing and how they may be drawn by a strong need for social identity.

3.1 General investor type

Wheat and Eckerd (2022) and Faverio and Sidoti (2023) indicate that there is a disproportionate selection of crypto traders who are young men. Smith (2022) suggests that this self-selection supports a boys club culture that colloquially is termed as “crypto bros.” Wiktionary defines a crypto bro as “[a]n enthusiastic cryptocurrency supporter, usually male, especially a dogmatic, condescending one.” Smith (2022) further describes this person as overconfident, narcissistic, and holding populist beliefs, which will be discussed later.

3.2 Cult-like subcommunities

Some crypto coin offerings try to draw cult-like followings based on names tied to religious ideals, popular fads, popular movements, popular phrases, or influential people, such as the MAGA, JESUS, Go [expletive] Yourself, FART, King Trump, Elon Doge, Elon Mars, Free Trump, Baby Trump, and Good Gensler coins. The latter is named, probably sarcastically, after the current Securities and Exchange Commission chair, who has publicly stated that he believes the industry is “rife with fraud and manipulation.”Footnote 11 One coin seems aptly named as CULT, and was launched by its founder with a manifesto: “My wishes are … to not become just a decentralized venture capital protocol, I want CULT to invest in radicals and revolutionaries, CULT is a home for outcasts, for those who feel insane, for those who are and FEEL different, we are the gunpowder, the ignition, we are the all singing, all dancing, crap of the world. … So if you are as tired as I am tired, if you are as furious as I am furious, as scared as I am scared, then join me, you are not alone any longer, the Many should not live in fear of their governments, it is the governments who should live in fear of the many [sic].”Footnote 12

Like cults, crypto leaders are often socially elevated to celestial status, which affords them disproportionate influence in their communities. Vitalik Buterin, for example, who created the Ethereum system at the age of 19, has recently been called the “public intellectual the tech world needs right now” (Roberts 2023). He was also declared “a genius alien that had arrived on this planet to deliver the sacrosanct gift of decentralization, …[and was] the reason everyone attended [a 2014 Miami Bitcoin conference] in the first place" (Pybus 2016). Elon Musk, known for his Tesla CEO role and his purchase and renaming of Twitter, was listed among the four most influential people in crypto who “have enormous leverage over the cryptocurrency market" (Magas 2023). Former Apple co-founder Steve Wozniak described Musk as a cult leader whom many people will follow no matter what he says (Bove 2023). A neuroscientist suggested Musk’s following and influence may derive from his wealth, and a management studies professor suggested that his followers admire his charming yet ruthless psychopathic traits (Rozsa 2022). Musk’s influence seems significant, as indicated by a more than 70% return for the CULT coin that followed a two-word ambiguous Tweet he issued that did not even reference the coin: “Cult / Culture” (Dzhondzhorov 2023).

Crypto influencers also face very strong incentives to develop their own cult-like followings. One psychosocial incentive is narcissistic supply, given the selection on narcissism within the crypto influencer community. Narcissistic supply is defined as “the emotional sustenance narcissists seek to maintain their self-esteem and self-worth” (Fishman 2023). It often involves soliciting or coercing external validation and adulation. Therefore, influencers presumably garner narcissistic supply benefits from increased investor following, increased investor praise, better access to higher tier VIP events, and better access to speaker engagements. Crypto influencers also face financial incentives, for example, via allocated access to new coin offerings based on the size and activity of their audience, the degree and nature of the audience interaction, including strong retention, and the quality and clarity of their communication (Diadkov 2023).

It seems reasonable to assume that behavior expectations within the crypto trading cohort might differ from those of other investment cohorts because of self-selection. There has been a documented “wide ideology gap” between young men and women in countries across the world (Burn-Murdoch 2024). Young men tend to lean toward conservative and even populist political views (e.g., Nilan et al. 2023; Henley and Sauer 2023). The draw to crypto seems natural, in this context, as cryptocurrency is a populist movement. Taylor et al. (2018) note that populism is founded in the dissatisfaction of “the people” with “the elite” or “the others” and is indicated by people feeling that their treatment by the system is unfair, that those in power are corrupt, and that they should have greater sovereignty or control rights. Hence cryptocurrency is inherently populist by design (e.g., Gilbert 2022; Mance 2022). Cryptocurrency is often presented as an alternative to fiat currencies (e.g., Abid et al. 2023), and crypto investors perceive there is value from the system’s decoupling from traditional infrastructure. The title of a 2020 subreddit post helps illustrate this perception: “Central Banks Want to make their own crypto. They’re the [expletive] reason crypto was invented in the first place. To end the tyranny….”Footnote 13

Crypto influencers need followers to engage monetization. Many guides on how to become an influencer are explicit about this, encouraging would-be influencers to “create a sense of belonging and excitement.”Footnote 14 Others analogize influencers as “crypto-heroes [who] offer their insights, viewpoints, or analyses … like a spark lighting a fireworks display. Their message quickly gains a large following … and fosters an active and knowledgeable crypto community. But it’s not just about information—it’s about people coming together, like superheroes assembling for a mission.”Footnote 15

Crypto communities can also become highly emotionally committed. Brichta (2023), for example, describes a “passionate network of contributors who find pleasure in running, using, and promoting Dogecoin. Its popularity is driven by a participatory culture of Web users and pop culture figures who have transformed it from a joke currency into a multibillion-dollar market. Or, in the words of the Dogecoin Manifesto, an ‘accidental crypto-movement that makes people smile.’” Brichta (2023) explores the cultural economy of this movement, seeking “to understand how a decentralized network of users cultivates a shared financial imaginary around Dogecoin.” This suggests cultural effects like those identified by Guiso et al. (2009), who find that perceptions of trust are associated with greater investment market participation. This also relates to herding literature (e.g., DeMarzo et al. 2004; DeMarzo et al. 2008), which helps explain financial bubbles.

3.3 Predictions for investor behavior and influencer incentives

The emotions or social-psychological aspects of the crypto experience seem to generate certain within-group cultural expectations, consistent with an affect heuristic (Barber et al. 2003; Slovic et al. 2005). There is a common meme, for example, strongly supported by influencer messaging, to “HODL” or hold on for dear life.Footnote 16 The meme derives from a 2013 discussion in a Bitcoin online forum where a prominent user communicated his intentions to hold his Bitcoins during down markets with a phrase that included a typo: “I AM HODLING.” While one might expect influencers to exploit followers who embrace the meme, some influencers place the cultural expectations above their own financial risks. One famous example is Glauber Contessoto, aka SlumDOGE Millionaire (@ProTheDoge), whose story is prominently featured in the 2023 documentary “This is Not Financial Advice.”Footnote 17 He watched the value of his holdings rise to $5,000,000 and then fall to $50,000 without selling before the crash. In the documentary, one of his friends advises him that he should sell right before Elon Musk goes on the U.S. comedy skit television show Saturday Night Live, since he predicts the price will peak for the coin that Musk had been promoting on Twitter. In response, Contessoto stated: “In a weird way, I’m kinda what everyone looks to when their buying Doge because I’m this person who’s holding … and if I can do it, they can do it. … I could cash out right now and just, you know, go about my life. But I would feel like I’m letting everybody down.”

Because influencers build emotionally linked self-selected communities, investors’ behavior will likely differ from those who invest in traditional markets. The literature has shown that men tend to be more overconfident than women (e.g., Lundeberg et al. 1994; Pulford and Colman 1997; Barber and Odean 2001) and crypto investing is disproportionately pursued by men. The behavioral finance literature notes that overconfident traders tend to trade more aggressively (e.g., Odean 1998; DeBondt and Thaler 1995) and hold under-diversified portfolios (e.g., Odean 1998). Therefore it seems reasonable to expect that crypto investors will hold or increase their positions to retain access or increase status within the community, notwithstanding potential warning signals about investment risk. Likewise, it seems less likely than in other markets that investors will impose reputation or enforcement costs on influencers if their investment performs poorly or are lost to fraud. This is because transactions are hard to trace (e.g., Cong et al. 2023; Vigna and Ostroff 2020) and investors often internalize blame for being victimized, even leading to death by suicide (Fabusola 2023). Influencers also, by design, can powerfully shape public perceptions. Therefore they may be able to deflect public criticism by, for example, blaming investors for not paying attention to their advice (e.g., Shanawaz 2022), claiming social media accounts were hacked (e.g., Demirkol 2023), or threatening, corrupting, or undermining investigators (Carreyrou 2023).

3.3.1 Implications for Merkley et al. (2023)

Merkley et al. (2023) posit that influencers may have incentives to exploit investors via pump and dump strategies. This is plausible, given the psychology discussed above regarding the selection of investors within their communities. Merkley et al. (2023) report evidence of price spikes around the release date of influencers’ Tweets that hype specific coins, with price declines very shortly thereafter, which they interpret as consistent with this strategy.

The pump and dump focus, however, misses other potential strategies that can also exploit this investor psychology. Several alternative strategies might be more lucrative than a pump and dump scheme and can avoid potential enforcement or reputation costs of pump and dump execution.

I posit that there are at least four alternative—and not mutually exclusive—exploitation opportunities.

  1. 1.

    To inspire investors to “hold on for dear life” to provide liquidity for money laundering. According to Europol, money laundering is associated with the illicit use of cryptocurrencies.Footnote 18 Chainalysis, a blockchain data analysis company, reports that almost $24 billion was laundered through cryptocurrency in 2022, which was a 68% increase from the prior year.Footnote 19 Amiram et al. (2022) report evidence of laundering to support terrorism.

  2. 2.

    To inspire investors to “hold on for dear life” and increase holdings to gain access to exclusive events that are priced with expensive admission tickets. Qubika.com lists 27 planned global crypto or blockchain conferences for 2024, as of its January update.Footnote 20 The VIP ticket cost for the Paris Blockchain Week, in April 2024, as an example, is €3,890 + VAT. It includes networking and access to a VIP lounge.Footnote 21 It can be upgraded to a MAX ticket at a total cost of €4,500 + VAT to gain access to 100 pre-screened startup decks and an investors’ lounge and breakfast. The potential proceeds from these events are significant, as the 2023 Paris Blockchain Week yielded over 6,000 participants.Footnote 22

  3. 3.

    To sell swag, for example, branded T-shirts, peripheral products, or advisory services to investors who “hold on for dear life.” Crypto traders have sizable revenue opportunities from selling peripherals. For example, Skyquestt.com estimates the global market for crypto wallets, which “aid in the storage of confidential keys, keeping crypto secure and accessible,” was valued at $6.75 billion in 2021Footnote 23 and is forecasted to grow to $61.87 billion by 2023. Influencers can also earn revenues from Doge-on-Mars T-shirts,Footnote 24 trading courses,Footnote 25 consulting services,Footnote 26 and even auditing the crypto wallets that clearly are not as secure as the marketing claims suggest.Footnote 27

  4. 4.

    To inspire investors to turn over investments to generate transaction fee revenues if influencers have a financial stake in the brokerage platform. Cointracker.io notes several ways exchanges may earn fee revenue.Footnote 28 Exchanges charge trading fees, deposit and withdrawal fees, and interest, borrowing, and liquidation fees. To illustrate, “Maker” trading fees are 0.35%, 0.1%, and 0.5%, for the Bittrex, Binance, and Coinbase Pro exchanges, respectively. “Taker” trading fees are the same for these exchanges but vary for others. Although declining in recent years, transaction fee revenue is significant. Coinbase, for example, reported $289 million in total transaction revenue for the quarter ending September 30, 2023.Footnote 29 If influencers have stakes in the exchanges, they may have incentives to generate trading volume. This is particularly true if they, for example, follow one consultant’s advice to “Launch a Regional Crypto Exchange to Find Acceptance in Niche Markets!” (Steve 2024).

Importantly, influencers’ alternative strategies change the expectations for market outcomes. In other words, the expected returns patterns, conditional on strategy, might differ from those predicted for a pump and dump scheme.

Recall that Merkley et al. (2023) expect the pump and dump strategy to generate a short-term price spike followed by a subsequent price decline. If influencers engage in hype to support money laundering or to sell conference access fees, consulting services, and peripherals, however, one might expect to observe more stable and upward long-term prices. If influencers have incentives to churn transactions to earn fee revenue, one might expect to observe price volatility and increased volume transfers from one hyped coin to another.

We might illustrate these alternative patterns by examining one of the hyped coins discussed by Merkley et al. (2023). Appendix A offers examples of crypto-influencer tweets. The first was made by @CryptoMichNL, who hyped the XCAD coin, on June 7, 2022. Figure 1 reveals the following patterns for price and daily returns.

Fig. 1
figure 1

XCAD prices and daily returns

Full size image

What seems clear from the patterns is that the price did decline following the Tweet on June 7, which might support the inference of a pump and dump scheme. However, it appears the price stabilizes thereafter, and for at least 20 trading days, daily returns meet or exceed that of the announcement date of the Tweet. Further analysis reveals that the same influencer also hyped the coin on at least three other occasions, early August, late October, and late November of 2022. This suggests the influencer might be more aligned with an alternative strategy.

3.3.2 Influencer backgrounds and network effects

To better understand influencer incentives and influencers’ impact on cryptocurrency markets, it would help to obtain data on their backgrounds and assess the potential influence of their networks.

Merkley et al. (2023) focus on influencers who self-proclaim they are experts. It is interesting to empirically assess those claims, at least in how they materialize in market outcomes. However, the inferences could be sharpened if there were additional biographical data that might help partition influencers by actual or perceived expertise. LinkedIn might offer such data, though it is also self-participatory. It seems likely, however, that influencers would want to host profiles on that platform, as their business models rely on network growth and visibility.

If one examines the LinkedIn profile for @CryptoBusy, who is one of the influencers featured in Appendix A, one will see that the co-founder, Tom Busby, earned an undergraduate degree in mechanical engineering and has experience in social media marketing and web development.Footnote 30 He was also a part-time warehouse operative and clothing store sales assistant. His profile leaves unresolved whether and how one might infer financial markets expertise; therefore it’s unclear whether or why investors trust his recommendations. In contrast, Michaël van de Poppe, whose moniker is @CryptoMichNL, holds an undergraduate degree in economics, finance, and organisation and notes six years of boutique trading experience on the Amsterdam Stock Exchange.Footnote 31 Rafaela Rigo, who is also listed in Appendix A and who goes by the moniker @RAFAELA_RIGO_, holds an undergraduate degree in physiotherapy. Her primary expertise is as a personal trainer, coach, and fitness model. She offers no apparent clarity on how she trained for her role as a “cryptocurrency technical analyst” in 2018, while she claims that she “STRIVE[S] TO LEAD OTHERS TO THE HIGHEST LEVELS OF THEIR OWN POTENTIAL. MENTALLY, PHYSICALLY, & FINANCIALLY!”Footnote 32 Her X (Twitter) feed indicates heavy use of exclamation points and capital letters as part of her influencer strategy but does not seem to offer any further clarification to support her financial expertise.Footnote 33 The link provided to her website from her X (Twitter) landing page is broken.Footnote 34 While this is clearly anecdotal, this evidence suggests there is variation in the degree to which influencers have financial training or expertise. This might help develop cross-sectional predictions about the degree to which investors might trust the quality of their financial advice.

While challenging to collect reliable data, it would be helpful to understand the potential network effects that relate to crypto influence. As noted earlier, the crypto markets seem to operate as access or social economies. Therefore, one’s influence on investor behavior is likely a function of network affiliation, which helps determine influencers’ brand value. Influencers’ financial incentive strategies are also likely to be affected by network affiliation. For example, if influencers are strongly affiliated with exchange owners, they may have greater incentives to produce hype to maximize transaction churn and increase transaction fee revenues. Perhaps the easiest way to capture some network affiliation effects is to examine joint-hype events, such as the June 7, 2022, Tweet by @CryptoMichNL regarding the XCAD coin. Merkley et al. (2023) present the Tweet in Appendix A and attribute it appropriately to this influencer. However, @KOUushik_ghosh, another influencer, also notes at least nine other influencers simultaneously hyped the same coin.Footnote 35

figure b

It would be helpful to understand whether there was collusion among these influencers to hype the coin, whether other influencers were also bullish, and whether these influencers are aligned with other networks (e.g., exchanges) that generate revenue.

To this latter point, researchers can trace potential network affiliations through open-source intelligence (OSINT) techniques. This might allow for more nuanced predictions regarding influencers’ incentives. Tom Busby, for example, who works under the moniker of @CryptoBusy, posted on his LinkedIn feed that he “had a great time networking and reconnecting with amazing people” at the AIBC Summit Dubai Eurasia 2023.Footnote 36 He also mentioned he had his inaugural panel moderation at the conference and thanked Olga Yaroshevsky for the opportunity. Yaroshevsky states that she is a content strategist, writer, journalist, and event host on her LinkedIn page.Footnote 37 Most notably, she is a conference producer who creates program and content strategy for conferences in the Middle East, Latin America, Asia, and the European Union. She has been leading content strategy for some of the most notable (and expensive to access) conferences in Hong Kong, Singapore, Africa, and Dubai. She also notes that she has hosted interviews with some of the most famous people in tech, blockchain, cybersecurity, and cryptocurrency. Given the nature of the access and identity economics to this industry, one might infer that Busby has access and prestige incentives to support Yaroshevsky’s needs, for example, by promoting coins that support paid attendance at her conferences.

Circumstantially, Yaroshevsky also notes that she is from Moscow, was trained in Russia, and has experience teaching post-graduates involved in the International Alfa Bank fellowship program. Alfa Bank is under sanctions relating to Russia’s military invasion of Ukraine.Footnote 38 It therefore reportedly has incentives to launder money through cryptocurrencies to circumvent these sanctions.Footnote 39 Her work to promote crypto and crypto conferences could, even unintentionally and without coordination, support market liquidity to enable laundering at volume. The U.S. Department of Justice charged Anatoly Legkodymov, a Russian national and senior executive of Bitzlato Ltd., a Hong Kong registered cryptocurrency exchange, with laundering funds worth hundreds of millions of dollars.Footnote 40 The U.S. Treasury Office of Foreign Assets Control also sanctioned Russian national Ekaterina Zhdanova in November 2023 for “her role in laundering and moving funds using virtual currency on behalf of Russian elites” via the Russian cryptocurrency exchange Garantex.Footnote 41 Garantex and the Russian dark web market Hydra had met previous U.S. sanctions in 2022.Footnote 42

Interestingly, Russians can also be victims regarding laundering. Komova and Sidorenko (2023) suggest there is pent up demand for liquidity from sanctioned Russian investors and that they are subject to being victimized by fraud, including financial pyramids and illegal foreign exchange deals, to help launder their investments.Footnote 43

A market test of whether influencers hype crypto to support liquidity for laundering might expect, for example, more stable price patterns, relative to pump and dump strategies, in coins that are hyped by any affiliated influencers.

In summary, future research can generate more precise predictions regarding influencers’ incentives and potential market implications of these incentives based on a deeper understanding of influencers’ backgrounds and networks. Concerns about data availability and its self-disclosure are likely mitigated because an influencer’s business relies on amplified exposure. Influencers have organic incentives to publicly provide these details, including boasting—often with open-source photographic evidence—about people they interact with, which would enable collecting fundamental data for network analysis.

3.4 Video content

Future research can also discern influencers’ depth of knowledge, charisma, and communicative ability from the vast amount of video footage available across such platforms as TikTok and YouTube. Accounting research tends to focus on the dissemination of written communication, even relying on written transcripts of analysts’ calls. There is now a lot more video content available, which can offer a better assessment of emotion and content depth, particularly relative to a Tweet. In the context of Merkley et al. (2023), many of the Tweets they analyze advise followers to engage with video content on a different platform (e.g., YouTube) for more details.Footnote 44 Meyer et al. (2023), for example, measure YouTube video comment, title, and transcript sentiment to examine the emotional contagion effect of crypto YouTube influencers. They report that “crypto vloggers transfer their emotions to their audiences … and show that they are likely to play with emotions purposefully.” Uryupina et al. (2014) offer a dataset of user-generated comments on YouTube videos that they annotate for information content and sentiment polarity, which might illustrate a potential rubric for future research.

4 Future research implications

Leveraging the fundamental need for social identity, influencers operate within a multi-billion-dollar industry designed to shape consumption preferences,Footnote 45 political beliefs,Footnote 46 or even whether people should “hold on for dear life” with risky securities.Footnote 47

With influencers’ ease of access, there is ever present risk that investor behavior across markets will be influenced by social identity cohorts, such as those that selectively engage in crypto markets. Tang et al. (2017) describe this risk as one where market sentiment is produced by a few community leaders, who expect member alignment and who minimize viewpoint diversity. Losses include significant investment underperformance for most lower ranked community members (e.g., Tang et al. 2017; Cookson et al. 2023).

Researchers need to carefully consider the power of social identity to better predict incentives and behavior, particularly within markets that seem to self-select participants. The fact that the influence industry can garner billions of investment dollars seems to support an expectation of influence growth. It is likely that we will observe greater effects across all markets, for example, with the proliferation of “meme stocks” and the influence of TikTok on young investors, such as with GameStop (e.g., Malz 2021; Kelly 2021).

Researchers should also consider that these influence cohorts are not simply focusing on market pricing. Some appear to be pursuing more ambitious goals that include trying to undermine enforcement agencies. Beyond lobbying and financial influence (e.g., Correia 2014; Velikonja 2015), we have recently observed efforts to challenge the Security and Exchange Commission’s regulatory authority and scope (e.g., Ross 2024), to steer business away from Delaware courts jurisdiction (e.g., Bhuiyan 2024),Footnote 48 and to undermine the credibility of criminal enforcement agencies and the judicial system at the state and federal levels (e.g., Reich 2024).

These efforts, like crypto, align with populist beliefs. If regulatory systems continue to face stress from political or other influencers, then research should explore market implications conditional on this stress. For example, it would be interesting to understand how markets might internalize harassment of regulators, threats to regulators’ family members, or nuisance suits, legal delays, and administrative requests (e.g., under FOIA) that are designed to overwhelm presumably limited regulatory resources.

Researchers might also glean clearer inferences by leveraging other psychological and sociological research streams. For example, there are considerable literatures on gambler psychology, marketing influencer psychology, evolutionary risk-tolerance, and attraction science. This paper focuses on the need for social identity for brevity. However, some of these other research areas can likely better inform that need and how it might manifest in behavioral predictions.

I thank Lakshamanan Shivakumar (editor) for the opportunity to discuss Merkley et al. (2023) at the 2023 RAST journal conference and for the opportunity to author this paper. I also thank Josh White for helpful feedback for the conference discussion. I thank Brad Badertscher, Jenny Chu, Bjørn Jørgensen, and Josh White for helpful comments.