MARKET INSIDER: The Proliferation of Spam + Armies of BotNets

Jennifer Sor - "...While many of the biggest market icons — people like Musk, ARK Invest's Cathie Wood, and SPAC king Chamath Palihapitiya — have either changed their tune or gone pretty much silent on the markets this year, there's a whole world of influencers on social media still trying to reach their audience as they navigate the bear market..."

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markets.businessinsider.com

The 2022 bloodbath across markets has taken its toll on financial influencers - and the void left as they pull back is being filled by loads of spam

Jennifer Sor

7 - 9 minutes

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• As stocks plummet, markets have become less susceptible to the Midas touch of "finfluencers."
• Spam activity on social media is rising as celebrities and influencers grow quiet, data shows.
• "You have a whole army of bots that can create that same explosion [as Elon Musk]," one cultural anthropologist said.

"After driving markets haywire with his cryptic tweets in 2021, Elon Musk has been mostly quiet with his investing advice this year. 

The Tesla CEO pioneered a new role for celebrities as stock pickers – but that's changing as a brutal 2022 crushes the gains made by individual investors during the two years of the pandemic, experts say.

Simply put, as stocks plummet and crypto winter deepens, markets have become less susceptible to the Midas touch of "finfluencers."

JOHN ERINGMAN "Engagement has been down since the peak of the market in November 2021. Not only have views been down, but the revenue streams have been cut in half too," John Eringman, a financial content creator who slings market wisdom to 1.3 million followers on TikTok, told Insider.

Eringman believes financial influencers will stick around on social media, but says the bear market rout has been tough on many accounts, including his own.

"2021 was the biggest year I had. 2022 and 2023 will be much less lucrative," he admitted.

 

✓ LunarCrush, an analytics site that tracks social media mentions of stocks and cryptocurrencies, shows lowered social engagement for some of the most popular stocks among retail investors since the S&P 500 touched its low near 3,600 in June, marking its worst first-half of the year since 1970. 

 

Tesla stock price mapped against engagements on social media.

Courtesy of LunarCrush

And ironically, given Musk's battle with Twitter over fake accounts on the platform, spammers have been rushing to fill that void.

Tesla stock price mapped against spam posts on social media.

Courtesy of LunarCrush

Make way for the bots

As the finfluencers pull back in the face of this year's withering bear market, there is a void that's being filled by copious amounts of spam. 

Spam activity on social media, which can be posted by humans or bots, is usually an attempt to influence market sentiment or buying and selling activity around a certain stock or crypto asset, says Jon Farjo, LunarCrush's Chief Product Officer. That can range from users pretending to be someone else – such as a surge in fake Vitalik Buterin posts ahead of the Ethereum merge – or any other activity that's deemed as an attempt to artificially raise the price of a stock or crypto token.

Spam is the fastest-growing metric tracked on LunarCrush's website, Farjo said, having increased exponentially since they first started tracking it.

One Harvard study found that if a spammer sells a stock a few days after heavily touting it on social media, they'll eke a return of 4.29%. On the other hand, people who buy stocks pumped by spammers' schemes and sell them two days later will lose an average 5.5% on the trade, not including brokerage fees.

"The evidence accords with a hypothesis that spammers 'buy low and spam high,'" the study's authors said. 

And the proliferation of spam as a new form of influence on the stock market could just be an enduring fact of life in 2022, experts say. Bill Maurer, a cultural anthropologist from UC Irvine, pointed out that the conditions that allowed Musk to rise as a stock celebrity are the same ones that also favor spammers. 

✓ "The kind of broad decline in trust in institutions in the conventional guardians and gatekeepers of finance gives people like Elon Musk this attention from investors in the market … [It's] the amplification of non-traditional sources of financial knowledge," Maurer said. "You have a whole army of bots that can create that same explosion."

But that doesn't mean the finfluencers will be wiped out completely – just that spam will be another main character in the story. 

"We're definitely making more financial characters," Maurer said. "The character changes, but I think [the market] still has that sense of, I'm gonna let you in on something that not everybody knows, right? I'm gonna let you in on the thing, and if you follow me, I'm gonna lead you to wealth even in this difficult market. 

"So I still think there's a place for that hucksterism that I would say Musk represents," he said."

✓ Engagement with Tesla, one of the most talked-about stocks on social media, has plummeted from heights seen earlier this year. As of mid-July, quality interactions with posts on Tesla has hovered below 100 million a day compared to heights of 240 million earlier this year.