Finfluencers and crypto advisors perform worse than market average, researchers find

Anyone who wants to make money investing in stocks or cryptocurrency is better off going to a traditional financial analyst than listening to a finfluencer online, researchers from Utrecht University concluded in a study published in the economics journal ESB. According to them, finfluencer advice on shares yields 1 percent less than the market average. On crypto, it’s even 2 percent less.

Finfluencers are social media influencers who give advice about trading in shares and cryptocurrency. They’re reach extends to over a million people in the Netherlands, mostly young people.

The Utrecht University researchers analyzed over 400 recommendations made by 21 major finfluencers between 2018 and 2022. The influencers each had at least 1,000 followers on YouTube and Instagram. A few had 10,000 to 50,000 followers.

The study concluded that the finfluencers’ advice was basically useless. They typically recommend shares and cryptocurrencies at a time when professional advisors’ sentiment was declining for these products. As a result, the finfluencers’ advice yielded less return than the market average: 1 percent less for shares and 2 percent less for cryptocurrency.

According to the researchers, finfluencers don’t base their advice on financial knowledge but on fear of missing out on opportunities or by simply following what others are saying. It could also happen that finfluencers promote pump-and-dump schemes, convincing others to buy certain shares to drive up the price just before they themselves sell those shares.

The Utrecht researchers advised Netherlands residents to focus their investment research on “other, more reliable forms of financial information.”