- Researchers at the University of Nevada found this out.
- Therefore, a big name should be a wake-up call for an investor
University of Nevada experts figured outhow celebrity advertising affects the success of initial coin offerings (ICOs). And the results confirmed a simple truth: the more hype, the sadder the end.
So, analysts have been studying whether celebrity ads are helping to stimulate demand for cryptocurrencies. And also how it affects the total amount of funds raised and whether celebrity-approved ICOs have a higher likelihood of fraud.
The study involved 21 celebrities with 1 million or more online subscribers who promoted ICOs between 2016 and 2018. Celebrities included actors, athletes, businessmen, reality TV stars and even members of the royal family.
Research has shown that celebrity endorsements can be an effective substitute for other demand-driven events such as pre-sales. But at the same time, investors miss important information – price signals about the viability of the token, its platform and management company.
Celebrity-promoted tokens raise more money through ICOs and have a higher chance of getting listed on an exchange. But these effects do not lead to the long-term success of the project.
The researchers also found that startups that actively recruited stars were scammed more often than regular startups. Experts even calculated the percentage of how often such startups were blown away (compared to the rest). This gap in different years was 23-40%.
