The Culture of Influencers in Crypto Twitter

An inside view of how it works, why it’s broken and how to fix it.

What’s a Crypto Influencer?

I hate the word influencer, but I can’t escape it. My account is fairly big, and I fit the bill no matter if I like it or not. In this thread, I will talk about the whole system of influencers. No gimmicks and nothing to hide.

I will describe the whole culture around it, but towards the end, I will also give specific examples of how this works from my perspective and my own page.

First, what’s an influencer? The name is fairly self-explanatory: a person with influence. This largely correlates with audience size, although not perfectly. Why are influencers relevant? Because they provide content.

This can be as simple as entertainment, but it often has an informative element as well. They are, in some sense, the main source of information and content for the crypto masses on Twitter. Somewhat of a mix between original sources (as early as possible) and more mainstream outlets (a blog article about the “next bitcoin”).

Part of the reason why influencers have such sway in crypto is that crypto companies are not allowed to advertise at all in most countries. Most Web2 companies have a marketing budget that they use for ad agencies, shoots, commercials and website ad placements. Web 3 companies — especially the ones with their own tokens — are not allowed to do any of these in most countries. So the primary way crypto projects advertise is through word of mouth, or through influencers.

Because they have influence and they have this special place in the chain of information, they are valuable. Just like a TV channel is valuable because they have an audience, and thus can be monetized.

It’s particularly monetizable because the audience is hyper-specific. If you buy an ad for Super Bowl, it will be seen by many millions, but likewise many millions won’t give a crap about what you’re selling. It doesn’t matter how good your ad is if you’re advertising your piano making business but I have no interest in pianos.

But with influencers, they already have the target audience. This makes them *very* valuable. This isn’t wrong per se, but it can get dark as we shall see. Because while you can see influencers as simply being in a position of value for advertisers, it nevertheless has an ethic attached to it.

The Dark Side — Exit Liquidity

How do they take advantage of it? By using the audience as what people call “exit liquidity”. E.g. I buy 5000 tokens for $5 ($25,000). I make a post hyping the project, a bunch of buys flow in and the price jumps to $7.5 (now worth $37,500). I now sell my 5000 tokens, making the easiest $12,500 profit ever. But of course, with that large sell, the price crashes, let’s say to $4. And now people that bought at $5–7.5 are burned. I am oversimplifying it but this is the general idea.

This is especially effective for very new tokens with small liquidity. I gave the example of a 50% boost, but it can be way more. Especially if they organize “hype” campaigns. For example, an influencer gets a 50% boost with their 100k audience, but he can easily make a private group with a bunch of his other influencer friends. If there are 10 in total with 100k each, so now the reach is 1M, assuming no overlap. Now the token pump is even bigger. If the 10x audience increase only bumps the buys by 3x, that’s still a whopping 37K profit.

Lastly, you can bet that bigger influencers are aware of a project’s marketing schedule, especially if they’re part of a Crypto VC (Venture Capital fund).

Remember what we said about advertising?

Crypto projects need to market themselves. They go to VCs to help them launch and get funding. VCs then tap influencers to “raise money” in exchange for getting the tokens at Private Sale price — or a price far below launch. If you look at almost any Crypto project’s tokenomics, you will see a portion allocated to “Private Investors”. This is what this means.

In the VC model, Crypto projects get strategic value and marketing from influencers. In return, influencers get tokens at Private Sale prices AND insider knowledge of the marketing schedule and roadmap. Which means influencers can “sell on the news”.

In Traditional Finance, this would be illegal and called Insider trading. Though this is the true definition of Exit Liquidity, crypto is still a speculative asset, so Insider Trading is framed as being par for the course.

False Marketing — Crypto Geniuses

Another problem with influencers is that they often market themselves as crypto geniuses. People follow them because they think that by following their calls, they will be able to make better calls and earn more money. Depending on the page and your own skill and knowledge within crypto, this may be true.

Influencers are usually more experienced than the average person, and they also have better access to information. New projects coming up, new updates, etc. However, this is fairly overrated. Most influencers are not crypto geniuses. Many don’t make that much more money than you, they just have been doing it for longer. And some are just plain lucky.

For example last year I bought SAND when it was very cheap. I made almost 10x on it. I didn’t put a lot of money into it, but if I did, I’d have had a huge amount of profit. But that wasn’t skill. I bought SAND along with many others, and I barely knew what made SAND special. It was just one coin among many that people were talking about that could be big, and I decided to risk it. It had a sprinkle of wisdom by diversifying, but it was more luck than anything else.

They often are proud of their calls too, many posting on their profiles the calls they made, eg LUNA at $10, SOL at $20, whatever. Again reinforces the idea of being great investors. Yet this is literally worthless. Many of these pages make hundreds of calls, no shit they are going to nail some. So will a monkey by typing random numbers. Sometimes this is done unconsciously and we all have this tendency (I need to make a thread just about cognitive biases). But the overall point is that without having the data of all (or most) of the calls they made and their overall success rate, you have no idea if they are any good.

Sometimes this view of positioning themselves as good investors is made even worse because they claim they live off crypto, but many times their true income is from:

1. Using their followers for exit liquidity.
2. From the marketing of their page and not the investments themselves.
3. Partially from the investments, but because they are able to get in so early in projects by having access to whitelists and private sales.

But from the public perspective, this is never highlighted, and it’s simply assumed that they are really good at choosing projects and entering/exiting at the right moment. This skill illusion often translates to private groups as well where you pay to have access to private calls from the influencer or a whole group of them.

Sometimes these are “pump” groups and they take advantage of other investors by coordinating their buys and sells, but sometimes they even scam their own group, by using the pump caused by the group for the exit liquidity of the team.

Paid promotions

I get messages asking for collaborations almost daily. There are several types of collaborations that I get invited for.

1. Advisor — This is what I enjoy the most and unfortunately the rarest. But I really enjoy giving feedback to projects and pointing them in the right direction. Even if informally.
2. Multi-Sig — They want a person outside their project to be in their multi-sig, to increase the confidence and trust of their investors.
3. Thread Writing They want me to write a thread about their protocol to explain how it works.
4. Giveaway — They pay me to host the giveaway, and they also supply the prize given

The first 2 are more practical about running the actual protocol, and the other 2 are more about marketing and getting the protocol known through an influencer’s community. The latter is more popular, especially giveaways.

Here is a screenshot of one that messaged me. This one is fairly typical, so you can see exactly how this is phrased:

Most projects that message me are not that great, to put it mildly. When any project messages me, I ask for:

1) KYC/doxx

2) MultiSig

3) Locked liquidity

4) Audit

If they pass that, most don’t, then I will read their White Paper. Then depending on how solid the project is, I may work with them. I try to bias my standards relative to the average, so even if I think a project could be done better, but it’s already far better than most in their niche, then I view that positively.

But again, it is very, very rare to even get to this point. My rejection rate is probably around 99%. And every time I reject a project, I am rejecting money for the sake of my community and conscience. And it adds up.

I made a loose estimation based on how many projects I rejected lately, and how much money I would have if I had accepted them. In the last 2 months, I could have made more than the average annual salary where I’m currently living in. It’s a lot of money, and even a bit depressing to think about. No wonder ethical influencers are almost impossible to find.

This is what makes the culture of influencers so problematic. Influencers have the opportunity to monetize their pages, but many feel stuck having to deny income to feel they aren’t scammers. Just saying to not promote anything isn’t particularly helpful because the option is always there, and that will tend to build up resentment and lead more people towards the dark side (“fuck it I will accept anything”).

Some may also not be in the same position as you think. I have the privilege to reject promotions, but I live a very comfortable life. What if I was living in a developing country? What if I had a family to feed? Etc.

Furthermore, it’s good to keep in mind that marketing is a needed part of DeFi, and not evil by itself. For example, in order to make @defo_app known, we hired influencers in order to spread the word about it. There isn’t anything wrong with this. No matter how good a protocol is, it won’t succeed if no one knows about it. Marketing and publicity exist in every sector.

Considerations and Solutions:

What we need to find is a good compromise. Influencers should be able to monetize their page while keeping the risk to a reasonable level and not exploiting their audiences. Here is how I think we should view and act within this space in order to achieve the best outcome:

First, we need to agree and fight off the most problematic aspect of influencers and CT: using their audiences for exit liquidity. This is by far the worst, and if there is something we should focus on, that takes priority over everything else.

We should criticize it whenever this happens, and do our best to attempt legal action, despite being so difficult. A good aspect of influencers is that they rely on their reputation and their audiences. So if there is a scandal of unethical behaviour, those pages will struggle to gain trust and continue what they are doing.

A good way to fight this is by tracking the wallets of influencers so that they get called out whenever they dump on their community. You may think this is impossible unless they willingly give out their addresses, but not so. Here @StrategicHash shares a very simple yet effective way to track influencer wallets, only using Excel.

The second worst, in my opinion, is talking about projects without disclosing that they were paid in order to talk about the project. Of course, it’s much better for the project if the information looks organic, rather than paid.

This implies that the influencer truly believes in the project and is invested himself, rather than simply being paid to mention the project. This is very misleading. This gets even worse because the influencer often tries to hype the project as much as he can. “This will be the best thing ever”, “I just invested 10k”, etc. This leverages the trust of the audience and makes it so that even more of their followers will invest (most times overinvest).

While this thread is mostly about Crypto Twitter, of course, the culture has a parallel in other platforms, and I see this A LOT on YouTube. Maybe it’s just a selection bias on my part, but I see it even more there than on Twitter. A lot of videos act as if their interest is completely organic and they fully believe the project will be HUGE.

I remember once I first got into crypto and YouTube I legitimately thought that most videos were made because the creators discovered the project and they wanted to share it. In reality, with big accounts, they’re almost always paid, and this is rarely disclosed.

This is also very unethical, and we need more transparency. If a project pays someone to talk about them, that NEEDS to be known. If you see a big page promoting a project and they don’t state it’s paid but you suspect it is (you should), ask them: were you compensated for this post?

Let’s remember that we need to find a compromise in order for the system to work well, therefore we need to accept promotions as being part of the game. Don’t demonetize influencers for having a paid post once in a while, but rather demand that this is fully disclosed.

I think giveaways work particularly well because it allows projects to get the marketing and exposure they need, but without giving the potentially false impression that the influencers think this is the best project ever and potentially mislead their audiences.

Giveaways are great — if done right. It needs to be clear that the giveaway is a collaboration between the influencer and the project, and that the influencer is not endorsing the project (“definitely buy it, best thing since sliced bread!”).

If this is done, then I see no harm. There are 3 perspectives on this:

1. The project, 2) The influencer, and 3) The followers.

I can see myself as the 3 of them. I have a project, I have a big page, and I also follow other big pages. With:

1) Projects need exposure, now they have it.

2) Influencers have a large audience that can be monetized, now they can do so.

3) Followers that like the influencer and want to support him, understand that from time to time they will have paid promotions.

However, even this needs to have some limitations. Even though I think giveaways are the least harmful of all collaborations, there still needs to be standards and filters. In my case, my biggest concern is that people don’t get rugged. Thus all the standards I mentioned earlier.

Although of course, none of these are bullet-proof, and you can’t ever guarantee a project won’t rug pull. You’re simply decreasing the likelihood of that happening, which is all you can do. The responsibility also falls on the audience if they decide to invest, and people shouldn’t blindly invest in projects they see on social media. DYOR isn’t just a fancy slogan, it’s the foundation of the community in crypto.

Then on top of that, I try to pick projects that have something different to offer and that look like they have a better chance of being successful. This is why my rejection rate is so high — very little fit the bill.

So if you see a page doing giveaways with every single project that shows up and seemingly with no standards, that’s not a good approach IMO. There needs to be a vetting process. Although it’s worth mentioning that even though I don’t like this, as long as it’s still transparent, this would still be way better than using followers as exit liquidity or convincing followers of how great the project is when in reality they don’t really believe it.

There also needs to be a balance in terms of quantity. The only reason why it’s acceptable to do paid promotions is that supposedly the content (in whatever format) is valuable. But there needs to be a compromise. If a page does nothing but giveaways, then it’s just spam, and it’s reasonable if the audience no longer finds following that account worth it.

I like books, and I’m subscribed to several book review YouTube channels. I don’t mind the slightest if they have ads on their channel, either default YT ads or paid promotions. I’m happy that they are getting compensated and they are incentivized to put out great content. But if they start having a 2-minute ad for a 5-minute video… that’s a different scenario altogether and I would unsubscribe.

Lastly, another alternative is that influencers monetize their audiences entirely by themselves. If the audience pays directly to the influencer, then they have a form of income without any type of advertising. This is truly the best scenario, but very difficult to achieve.

First of all, it requires a very large audience to do so. For example, @thedefiedge does not monetize his page at all for now. If he could self-fund it very easily, I’m guessing he would have probably done it by now. Rather, he is playing the long-term by getting a bigger audience and networking instead.

And @Route2FI, with an even bigger audience, does relatively standard ads in his newsletter (in a way that’s very acceptable). If he could monetize his audience by donations alone, I’m guessing he would. It just doesn’t work well until your following is truly massive, I think.

Not to mention that there isn’t (to my awareness) a good infrastructure to do this with crypto. Things like Patreon work great with fiat, but I’m not sure if there is a crypto equivalent with the same easy interface and popularity.

Recapping this massive thread:

• The culture of influencers can be very dark
• There is a huge amount of money involved
• Many use their audiences for exit liquidity
• They market themselves as genius investors when they’re not
• They are paid to shill bad projects
• They hype a project as if it’s organic interest
• Promotions are not disclosed
• We need to focus on removing the darkest part of the influencer system
• The option for influencers to monetize their pages is never going away
• Marketing is part of crypto/DeFi and it’s needed
• We need to find a compromise of allowing influencers to have partnerships without dishonesty