New research from the College of Nevada, Reno College of Business and Vanderbilt College explores how movie star endorsement impacts an preliminary coin providing’s (ICO) success. Just like preliminary public choices (IPO) in inventory, ICOs elevate funds to develop issues like a platform or enterprise by issuing a brand new cryptocurrency earlier than it’s traded on an change.
Dr. Sean Wilkoff, assistant professor of finance on the College of Nevada, Reno, and Dr. Joshua T. White, assistant professor of finance at Vanderbilt College, beforehand researched the function of media coverage in the non-fungible tokens (NFTs) market and determined to discover the function of movie star endorsements within the ICO market. The researchers wished to search out if endorsement works as an alternative choice to different demand-driving occasions for cryptocurrencies, resembling a presale, if movie star endorsement will increase the general quantity of funds raised and if ICOs with movie star endorsements had the next chance of being scams.
“The media is seen as respected, and our analysis discovered that media reporting on NFTs educated traders in regards to the NFT market,” Wilkoff stated. “With movie star endorsement, it’s a special story as a result of celebrities aren’t outlined solely by their capacity to offer respected monetary recommendation.”
The analysis examined 21 celebrities with a web-based following of 1 million or extra individuals on a minimum of one platform who endorsed an ICO between 2016 and 2018. Celebrities checked out have been actors, athletes, a businessman, actuality tv stars, and a member of royalty.
Analysis findings indicated that movie star endorsements can function an efficient substitute for different demand-driving occasions, like a pre-sale, however that with no pre-sale, traders lose info resembling worth indicators in regards to the viability of the token, its platform and administration crew. Movie star endorsements elevate extra money on the ICO and have the next chance of being added to an change, doubtless as a result of further capital raised. Nonetheless, these results don’t translate into long-term success. Researchers additionally discovered that movie star endorsements usually tend to be a rip-off, particularly when the movie star’s experience (e.g., a boxer) doesn’t match that of the platform being constructed (e.g., a streaming video service). These findings aren’t generalizable to all investments, simply ICOs.
“An endorsement is just not at all times a sign of high quality, and there’s a hyperlink between movie star endorsement and the funding being a rip-off,” Wilkoff stated. “Nonetheless, it is very important keep in mind that not all endorsed ICOs are scams and never all scams are celebrity-endorsed.”
Lately, many celebrities resembling Shaquille O’Neal have been implicated within the lawsuit in opposition to Futures Change (FTX), for endorsing the cryptocurrency change, which collapsed as allegations of criminal activity have been made public.
“Taylor Swift was provided a deal to endorse FTX however declined after doing her analysis on it,” Wilkoff stated. “Celebrities ought to conduct due diligence and analysis any cryptocurrency-related digital asset or change earlier than endorsing it and traders shouldn’t simply blindly belief a star endorsement.”