The 2022 Stock Rout Has Been Tough on Market Influencers

  • As stocks plummet, markets have become less vulnerable to Midas’ influence of “influencers.”
  • Social media spam activity is on the rise as celebrities and influencers quiet down, data shows.
  • “They have a whole army of bots that can create the same explosion [as Elon Musk]’ said one cultural anthropologist.

After messing up the markets with his cryptic tweets in 2021, Elon Musk has been quiet with his investment advice for the most part this year.

The Tesla CEO has pioneered a new role for celebrities as stockpickers — but that’s changing as a brutal 2022 wipes out gains for individual investors over the two years of the pandemic, experts say.

Put simply, with stock prices plummeting and the crypto winter deepening, markets have become less susceptible to the Midas touch of “influencers.”

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While many of the biggest market icons – the likes of Musk, ARK Invest’s Cathie Wood and SPAC king Chamath Palihapitiya – have either changed their minds this year or gone pretty quiet on the markets, there’s a whole world of influencers out there on social media, still trying to reach their audience while navigating the bear market.

“Since the market peaked in November 2021, engagement has declined. Not only have views gone down, but revenue streams have halved,” said John Eringman, a financial content creator who cracks market wisdom to 1.3 million followers on TikTok, Insider told.

Eringman believes financial influencers will stay on social media but says the bear market dip has been difficult for many accounts, including his own.

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“2021 was the greatest year I’ve had. 2022 and 2023 will be much less lucrative,” he admitted.

That’s because in a bear market, investors are simply less susceptible to these influencers’ suggestions, according to Paul Delfabbro, a professor who has researched the psychological motivations of crypto traders.

“Elon had plenty of airtime and celebrity exposure at just the right time — in the midst of a … bull market. Loads of new retail investors and many on social media are receptive to his messages. You know how rich he was and that anything he could turn to gold,” Delfabbro told Insider.

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But it’s harder to convince people of that in a bear market. “It’s like trying to play a happy melody against a loud dirge,” Delfabbro said.

LunarCrush, an analytics site that tracks social media mentions of stocks and cryptocurrencies, is showing reduced social engagement for some of the most popular stocks among retail investors since the S&P 500 bottomed at nearly 3,600 in June, marking its worst first half of the year since 1970

Engagement in Tesla, one of the most talked about stocks on social media, is down sharply from where it was earlier this year. By mid-July, the number of high-quality interactions with posts on Tesla was under 100 million per day, compared to 240 million earlier this year.

Tesla share price and social commitment

Tesla stock price was compared to social media exposures.

Courtesy of LunarCrush

And ironically, given Musk’s battle with Twitter over fake accounts on the platform, spammers have rushed to fill that void.

Tesla price and spam posts

Tesla stock price has been matched to spam posts on social media.

Courtesy of LunarCrush

Make room for the bots

As finfluencers retreat in the face of this year’s bear market, there is a void filled by plenty of spam.

Social media spam activity, which can be posted by humans or bots, is typically an attempt to influence market sentiment or buying and selling activity related to a particular stock or crypto-asset, says Jon Farjo, chief product officer by LunarCrush. This can range from users pretending to be someone else — like a surge in fake Vitalik Buterin posts pre-Ethereum merger — or any other activity seen as an attempt to artificially inflate the price of a stock or crypto token raise.

Spam is the fastest growing metric tracked on LunarCrush’s website, Farjo said, and has grown exponentially since tracking began.

A Harvard study found that a spammer sold a stock a few days after heavily promoting it on social media, earning a 4.29% return. On the other hand, people who buy stocks pumped by spammers and sell them two days later lose an average of 5.5% of the trade, not including brokerage fees.

“The evidence is consistent with a hypothesis that spammers ‘buy low and spam high,'” the study authors said.

And the proliferation of spam as a new form of influencing the stock market may just be a permanent fact of life in 2022, experts say. Bill Maurer, a cultural anthropologist at UC Irvine, pointed out that the conditions that enabled Musk to become a stock star are the same ones that favor spammers.

“The nature of the widespread loss of confidence in institutions in the conventional guardians and gatekeepers of finance is what gets people like Elon Musk this attention from investors in the market… [It’s] “augmenting non-traditional sources of financial knowledge,” Maurer said. “They have an army of bots that can create the same explosion.”

But that doesn’t mean that influencers will be completely wiped out – just that spam will be another main character in history.

“We’re definitely doing more financial characters,” Maurer said. “The character changes, but I think [the market] still feels like i’m going to let you in on something that not everyone knows, right? I will let you in on the matter and if you follow me, I will lead you to riches even in this difficult market.

“So I still think there’s a place for that hucksterism that I would say Musk represents,” he said.