As the digital currency market continues to grow, retail investors are being bombarded with advice from social media crypto influencers. These self-proclaimed experts promise valuable insights and recommendations, but a new study suggests their advice may be more hype than substance.

The research, conducted by a team of university researchers, analyzed the impact of tweets from over 180 crypto influencers on follower behavior and token prices. The results are concerning: while tweets triggered short-term price increases, averaging nearly 2% within the first two days, these gains quickly evaporated, with a cumulative return drop of nearly 7% within a month of influencer endorsements.

The study found a distinct pattern: influencer tweets created a temporary price surge, followed by a significant decline, suggesting the buying frenzy wasn't based on long-term fundamentals. This resonates with real-world examples, such as the ill-fated CryptoZoo project, which attracted millions in investments before facing accusations of being a "rug pull" scheme.

Researchers from three universities analyzed 36,000 tweets from prominent crypto influencers, covering recommendations for 1,600 different assets. They found that positions opened based on influencer signals showed a decline of 2.20% after 10 days and 6.50% after 30 days.

Regulators have taken notice of the rise of influencer marketing in the crypto space. The European Commission has filed a complaint regarding potentially misleading crypto promotions on social media, and new regulations like MiCA could hold influencers accountable for market manipulation through their endorsements. In the US, the SEC has already cracked down on celebrities promoting unregistered cryptocurrencies.

The study highlights the importance of responsible investing in the volatile crypto market. Social media influencers can be entertaining, but they shouldn't be the primary source of investment advice. Investors must be cautious and do their own research before making investment decisions.