The Swiss Finance Institute conducted an extensive analysis of 29,000 finance-focused social media accounts, including those discussing Bitcoin and cryptocurrencies. The study aimed to assess the quality and impact of financial advice provided by these accounts.
The research, led by Ali Kakhbod, Seyed Mohammad Kazempour, Dmitry Livdan, and Norman Schuerhoff, revealed that 28% of influencers provided beneficial predictions, yielding a monthly return of 2.6% above the market. However, 16% offered neutral advice, matching market performance without significant advantage, while 56% gave harmful advice, resulting in a monthly loss of 2.3%.
Surprisingly, influencers with the largest followings tended to give the worst advice, often being overly optimistic in bull markets and overly pessimistic during downturns. Contrarians who consistently opposed this group’s advice achieved a positive monthly return of 1.2%.
The study identified a trend where the most successful financial advice came from accounts that tweeted less and had fewer followers, contradicting the traditional belief that influence correlates with a larger audience. These accounts demonstrated the ability to offer contrarian advice, contributing to their success in providing valuable financial guidance.
The research underscores the importance of critical evaluation when seeking financial advice on social media, particularly on platforms like Twitter. While some influencers offer valuable insights, others may lead to financial losses. The findings suggest that followers seeking reliable guidance should consider the past performance of influencers and their ability to manage both bull and bear market conditions, as a large following does not always equate to sound financial advice.