Written by 8:50 am Cryptocurrency

YouTubers Are Peddling Terrible Crypto Investment Advice

  • A generation of new hype-men are feeding audiences fascination with cryptocurrencies over social and traditional media. 
  • But their predictions are often terribly wrong. 
  • Their business practices show that they don’t need to be right to make a killing off of their audiences. 

Last December, the YouTuber Carl “The Moon” Runefelt appeared on Fox Business to make a lofty prediction.

Bitcoin had recently dropped from an all-time high of more than $60,000 to just under $50,000, but the former supermarket clerk turned cryptocurrency influencer from Sweden told viewers it would hit a staggering $300,000 by the end of 2022. 

“Bitcoin is king,” Runefelt told a guest host on the show “The Claman Countdown.” Afterward, he said to his 560,000 YouTube followers that “I’m so grateful I’m able to speak about crypto in mainstream media. It’s very, very cool for me personally, because I want to push crypto mass adoption.”

Unfortunately for his viewers on Fox and social media, Runefelt’s predictions haven’t yet borne out. By spring, bitcoin plummeted to below $20,000. Well over halfway through the year, the cryptocurrency is still plateauing around that level — less than a third of its late 2021 peak.

But as the mainstream popularity of cryptocurrencies grows, an overnight generation of unconventional hype men are touting questionable advice to millions of people over social media, and increasingly, on traditional media. Streaming from their cars and living rooms, these influencers often blur ethical lines, while existing in a professional gray area: somewhere between television host, Alt-Street pundit, stock analyst, and financial advisor. 

Their profits come from far more than just cryptocurrency earnings. Many heavily promote referral links for cryptocurrency exchanges, earning them thousands of dollars through cuts of their followers’ trades. Some flog crypto-branded T-shirts and other merchandise to loyal fans. There are influencer-backed online classes that promise to make viewers crypto-millionaires. And others have made big money from undisclosed advertisements from crypto companies seeking publicity.

Together, these revenue streams mean cryptocurrency influencers profit off their viewers no matter which way the market turns.

As TV shows and publications hunt for talking heads that can explain the next big cryptocurrency, these hype men are finding regular perches on outlets from CNBC, Fox, Forbes, Bloomberg, and Insider, extolling the virtues of their favorite token with little scrutiny of their credentials or credibility. 

Off-target predictions from unorthodox backgrounds

“Don’t trust a word I say,” John Vasquez, a 48-year-old former Wells Fargo district branch manager turned influencer, told his 1.1 million TikTok followers in a video posted this past spring. “Trust the feeling and vibration it creates inside of you.”

Vasquez’s predictions have flopped. Six coins he recommended to Insider readers in November 2021 are down 73% on average. Another altcoin, ripple — which he told followers in February 2022 to buy the dip and hold on “like a tick on a dog” — dropped from $0.84 to $0.32 since then. (In an email, he said his “content has always been based on long-term view of the markets and not get rich quick.”)

Screenshot of coach JV's YouTube page

Vasquez’s YouTube channel makes ambitious predictions for cryptocurrency. But his favorite coins have flopped.

Screenshot


Vasquez, like many of his crypto-influencer colleagues, came from an unconventional background. Before hawking crypto advice wrapped in New Age platitudes, he netted hundreds of thousands of followers as a TikTok wellness vlogger. By 2021, after pivoting into finance and crypto, he boosted his follower count well over seven figures. The self-described “truth seeker” now records videos in tank tops preaching the merits of Jesus, TikTok, and crypto. 

Vasquez’s experience in retail banking gives him some financial background, but many of his peers have none. Unlike mainstream financial professionals — from certified financial planners to research analysts — most cryptocurrency analysts rarely have any certifications or financial training. Ben Armstrong, or @BitBoy_Crypto, a famous influencer with over 1.4 million followers, previously ran a faith-based youth rehab facility in Georgia that was criticized by the state for failing to meet various regulatory standards. Christopher Jaszczynski — aka MM Crypto — was a former taxi driver before pivoting to cryptocurrency and sharing his advice with news outlets ranging from Forbes to CNBC. Runefelt grocery-store cashier before making it big on crypto YouTube and moving to Dubai. 

Jaszczynski and Armstrong have track records similar to Runefelt and Vasquez. Jaszczynski predicted bitcoin would reach $300,000 before it collapsed. Armstrong championed the high-yield savings crypto platform Celsius before it went bankrupt earlier this year.

Runefelt, Jaszczynski, and Armstrong did not respond to Insider’s email seeking comment.

“You’ve got to have more experience before just taking someone’s nest egg into your hands and advising them on it,” Ed Gjertsen, the former national chairman of the Financial Planning Association, told Insider. According to Gjersten, traditional financial advisors go through a rigorous training process before handling people’s money. They also often have strict rules around disclosures such as felony charges or bankruptcies, and against investments that could constitute conflicts of interest.

Credentialing doesn’t solve everything, but it gives you a little more confidence

Both Vasquez and Armstrong filed for bankruptcy in the early aughts, which in many financial-services roles would require disclosure to a regulator like the SEC and would be scrutinized by prospective employers. YouTubers are also under no obligation to fully disclose their holdings, leaving viewers unaware if the content creator has a stake in what they’re pushing. Perhaps wary of running afoul of regulations, Armstrong adds written disclaimers to his videos asserting that his views are “strictly personal opinions … NOT financial advice.”

Of course, crypto YouTube is a far cry from the regulated world of traditional finance. And even Wall Street veterans and analysts are often wrong about their predictions. CNBC’s Jim Cramer — a Goldman Sachs alumnus — has been widely parodied for his market views and stock picks. But some experts say credentialing the field could help bring more oversight into the industry. 

According to Donna Hitscherich, a Columbia Business School professor, credentialing influencers may give consumers reassurance that they have a baseline understanding of the cryptocurrency market and are held to a professional standard. “Credentialing doesn’t solve everything, but it gives you a little more confidence,” she said. 

When their trades fail, influencers lean on supplemental income sources

Even as their predictions have faltered, many cryptocurrency influencers use other revenue streams to pad their own wallets. 

Many lean heavily on referral links, receiving financial incentives from cryptocurrency exchanges in return for sending them a pipeline of customers. Armstrong and others have repeatedly promoted Binance, one of the world’s largest exchanges, through affiliate links. But smaller trading sites like Phemex and Bitget offer similar enticements to influencers as well, and there are numerous crypto-trading “tutorials” on YouTube from dozens of less prominent YouTubers enticing viewers to use their referral links.

A screenshot of YouTuber MMCrypto's profile, with multiple videos of him talking about ceypto

MMCrypto has made some sky-high predictions for bitcoin that haven’t been borne out.

MMCrypto/YouTube


Armstrong, Runefelt, and Jaszczynski have also heavily promoted Bybit, a Singapore-based cryptocurrency exchange that lets users engage in risky margins trading. This method allows traders to use loaned assets while trading, which can deliver outsize returns or completely wipe out an investor if the market goes south. The rival exchange Coinbase briefly offered customers three times their collateral in leverage before removing the option due to regulatory concerns, but Bybit allows users to trade with 100-times leverage. 

Aaron Sharockman, a vice president at the media ethics and education group Poynter, told Insider he had concerns about how these referral schemes could incentivize influencers’ coverage or push them to encourage reckless trading behavior.

 They have no investment in you being successful.

 “In order for me — the creator — to make money, all you — the user — has to do is invest into this program. It doesn’t matter to me if you win or lose, it just matters if you put it in,” he said. “Once the transaction is something like that, then the creator is invested in one thing: Getting you to put money into that system. They’re not invested — they have no investment in you being successful. That part doesn’t matter to them. And once we eliminate that connection, that bond between the creator and the user, we really do have an ethical problem.” 

Bybit claims to have over 11,000 influencer partners, offering them $500 for each referral, and a 30% commission on the fees Bybit takes on every trade made by those users. In total, Bybit states on its website that it paid out more than 5,600 bitcoins in commission — more than $120 million at today’s prices. 

Online paid courses are another popular business model for influencers. Ben Armstrong promotes a $30-a-month crypto-training program called the Bitlab Academy. Vasquez sells his followers on the 3T Warrior Academy, a members-only crypto group that teaches the importance of cryptocurrency trading, fitness, and mindset. Vasquez has previously claimed to make over “seven-figures” from his academy, and told Insider it has more than 1,200 members. 

Other influencers have made a killing promoting tokens without disclosing advertisements to readers

Earlier this year, a Twitter user that goes by the handle @ZachXBT posed as an under-the-table sponsor, soliciting a spot on Armstrong’s channel. 

According to @ZachXBT, he was sent a menu of prices — from $2,500 for a glowing article to $40,000 for a YouTube Interview. The Washington Post previously reported on Armstrong’s pay-for-play arrangements. Armstrong told the Post that he made “maybe close to a million” from before dropping sponsored content in January 2022.

A price list leaked by ZachXBT appears to show that dozens of small crypto influencers also have menus for similar undisclosed deals. 

Screenshot of Ben Armstrong's YouTube

Armstrong was previously accused of profiting from undisclosed advertisements on his YouTube channel.

Screenshot


Ex-Federal Trade Commission attorney Chris Leach told Insider that influencers can run afoul of the regulator’s advertisement rules if they don’t properly disclose sponsorship. To properly inform the public, they need to communicate the sponsorship during the video — not just by putting #ad in the description or other methods easily missed by a viewer. 

In recent months, regulatory agencies including the FTC and the Securities Exchange Commission have bulked up their crypto-enforcement teams and warned the public about crypto scams (“false promises of easy money”), partly because of so many consumer complaints. 

“Fraud has been with us for a long time,” Leach said. Crypto “happens to be the latest flavor of fraud that the agencies are seeing.” 

Influencers show no signs of stopping

This summer, the Federal Trade Commission proposed tighter rules for influencer advertising. Similar crackdowns have been launched elsewhere in the world, from Australia to the United Kingdom. But with little regulatory oversight, crypto influencers show little sign of slowing down — despite the precipitous decline of the crypto market. 

Some are cashing in with merchandise sales, with Armstrong, Vasquez and Jascynski all selling various hats, T-shirts and mugs emblazoned with slogans — letting fans display fealty to their chosen YouTube stars and cryptocurrencies. (For those hurting from the recent crash, Armstrong offers a “keep calm and buy the dip” shirt.) 

Runefelt was named one of Forbes Monaco’s “30 under 30” list. In August, he was the cover star of Entrepreneur Magazine’s Middle Eastern edition. A recent appearance on the business-news channel Cheddar labeled him a “billionaire.”

Screenshot of Carl Runefelt's Youtube

Carl Runefelt is one of the YouTube’s most popular cryptocurrency influencers.

Screenshot


Others have taken to bashing their critics for questioning their judgment. In a video posted last winter, Armstrong described his detractors as people with “extremely low IQs.” He went on to suggest his advice should be taken as frivolous entertainment. “Predictions are for fun,” he said. “This is the kind of content people want.” Since then, he has made appearances as a crypto expert everywhere from Bloomberg to Wharton Business School

In August, he filed a defamation lawsuit against a fellow YouTuber, “Atozy,” who had called him a  “dirtbag” who “scams” his followers — prompting others in the crypto community to donate to Atozy’s legal defense.  

Some influencers’ predictions are also growing more far-fetched. In a recent video, Runefelt made another bold claim — this time from a hospital room at the bedside of a fellow influencer. 

“Inflation and the monetary system collapsing could take bitcoin to hundreds of thousands if not millions of dollars,” he said. Runefelt told his followers the coin could be worth well over $10 million by 2024 — an astonishing 4,000% increase from its position today. 

At the top of the video’s YouTube comments sat another pinned referral link for his viewers to sign up for Bybit. 

Source link

Close