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The Swiss Finance Institute conducted a comprehensive study analyzing the accounts of 29,000 finance-focused phenomena, including those related to Bitcoin and cryptocurrencies. The study aimed to examine the quality and impact of the financial advice and targets offered by these accounts. Interesting results emerged from the research.
Bitcoin, Cryptocurrencies, and Finance: Insights from the Study
The study, conducted by Ali Kakhbod, Seyed Mohammad Kazempour, Dmitry Livdan, and Norman Schuerhoff, revealed intriguing information about the world of financial advice on social media. According to the results among accounts providing financial guidance:
- 28% offered useful predictions, yielding a monthly return 2.6% above the market.
- 16% gave neutral advice, performing at the same level as the market without significant advantage.
- 56% provided harmful advice, leading to a monthly loss of -2.3%, highlighting the risks associated with misguided recommendations.
Surprisingly, the study found that influencers with the most followers tended to give the worst advice. This counterintuitive trend was linked to being overly optimistic during bull markets and overly pessimistic during bear markets, as well as riding the wave too long. Strikingly, those who consistently opposed this group’s advice, emphasizing the value of contrarian strategies, achieved a positive monthly return of 1.2%.
Success Among Financial Advice Givers
Within the community of financial advice-giving influencers, the research identified a notable trend. The most successful advice came from accounts that “tweeted less and had relatively fewer followers.” Contrary to the conventional belief that impact is associated with a wider audience, these accounts demonstrated the ability to offer contrarian advice that went against the prevailing market sentiment. This contrarian approach contributed to their success in providing valuable financial guidance.
The study emphasizes the importance of critical evaluation when receiving financial advice on social media platforms, especially on social media. While a significant portion of influencers can offer valuable insights, a considerable number may also provide advice leading to financial losses.
An Important Consideration for Those Seeking Reliable Guidance
For followers seeking reliable guidance, it is very important to consider the past performance of influencers and their ability to manage both bull and bear market conditions. As the findings of the study suggest, the allure of influencers with a large following may not always translate to sound financial advice.
In conclusion, the research by the Swiss Finance Institute sheds light on the dynamics of financial advice on social media. The study reminds investors to approach social media advice with caution, emphasizing the need for a critical assessment of the situation and the track records of influencers.
As the financial environment continues to evolve, the insights from the study could enable individuals to make informed decisions in an increasingly interconnected and information-rich world.
