With the rise of cryptocurrency, crypto influencers have gained popularity on social media, offering advice on how to invest in digital currencies.

But is their advice actually helpful?

A new study suggests it may do more harm than good.

According to researchers, crypto influencers’ tweets might initially boost the price of cryptocurrencies.

“Our results show that crypto influencers’ tweets often lead to positive short-term returns because they grab investors’ attention,” says Ken Merkley, a professor at Indiana University.

However, these gains quickly disappear, leading to negative long-term returns. This pattern suggests that influencers’ advice often lacks real investment value and may even resemble “pump and dump” schemes.

The researchers analyzed about 36,000 tweets from 180 well-known crypto influencers over two years, focusing on more than 1,600 cryptocurrencies. They tracked how prices changed from the day the tweets were posted to 30 days later.

Initially, cryptocurrency prices rose—by an average of 1.83% on the first day and 1.57% over two days.

But the gains didn’t last. Prices started to drop as early as day five, with average returns from day two to day five falling by -1.02%. By the 30th day, returns had dropped by -6.53%.

Coauthor Mark Piorkowski explains, “If someone buys little-known crypto tokens on the day of a tweet and holds them for 30 days, they would lose about 7.9%, which amounts to an annualized loss of 62.8%.”

The study found that tweets from influencers claiming to be crypto experts, especially those with large followings, had even worse outcomes for investors.

“Post-event losses were more severe when influencers described themselves as experts,” Piorkowski says.

While it’s possible to profit from their advice by selling shortly after a tweet, this strategy is risky and unrealistic for most investors.

These findings are especially important as cryptocurrency scams continue to rise. In 2023, the FBI reported Americans lost $5.6 billion to crypto scams—a 45% increase from 2022.

Researchers suggest that many influencers prioritize gaining followers or promoting trending tokens over providing sound investment advice. “Some crypto influencers may just be chasing trends or visibility without considering the future performance of the assets,” says coauthor Brian Williams.

The study concludes that crypto influencers’ advice often leads to short-term gains but long-term losses. “Investors should be cautious,” Williams warns.

So, before you act on an influencer’s tweet, think twice. Their advice may benefit their visibility more than your wallet.