If Elon Musk’s recent impact on the cryptocurrency – Dogecoin – has taught us anything, it’s that the sector is volatile. According to Forbes, “The price of the meme-based, somewhat satirical dogecoin—adopted this year as a pet project of Tesla billionaire Elon Musk—has added more than 10% this week, helping it climb to over 30 cents per doge token for the first time since mid-June.” And other celebs like Mark Cuban -from the USA’s Shark Tank TV programme- are backing the popular meme token too. But crypto investing can carry huge risks. Much like all recent online speculative investing, giant losses are possible; as well as gains. But influencers are now cashing in their for-payment opinions on crypto. And that is why Kim K’s recent Crypto post should worry you immediately.
What did Kim K do wrong?
According to the head of the UK’s Financial Conduct Authority (FCA), Kim K tweeted out a promotional post about the new token, Ethereum Max. Apparently, this is a speculative digital token that is only a month old and highly volatile. They’re not regulated by the FCA – although ads for financial products usually are. The BBC quotes the chairman as saying, “The promoted token Ethereum Max was, he stressed, not to be confused with the Ethereum cryptocurrency. “I can’t say whether this particular token [Ethereum Max] is a scam,” he said. “But social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all,” he said.”
Plus, it’s well known that many influencers don’t even use the products that they promote. So, even though this post is properly denoted as an ad, it’s for an unregulated financial product that Kim K might not even own. Any turn of the market will spell financial ruin for many of her 250 million followers if they trade solely on her recommendation.
What it means for you
Overall, the long and short of it is that you shouldn’t get your trading advice from influencers or celebrities. Even ‘good guy’ billionaires like Elon Musk aren’t always right. And the fluctuations they create in the marketplace can be financially devastating for smaller investors. Educate yourself on crypto assets and tokens; including their regulatory status. If you feel like influencers and celebs shouldn’t do this sort of advertising, talk to your local government or the ASA. Never make a financial investment from panic or as part of a movement unless you’ve fully researched the risks yourself. Understand that any financial product not regulated by the FCA is not covered by government schemes. So only invest what you can afford to completely lose.
What do you think about celebs creating crypto speculation? Have you bought an unregulated financial product off of an influencer’s recommendation? Would you? Let us know in the comments below.
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