Many celebrities who promoted cryptocurrency as a solid investment have suddenly gone silent about their views and there are questions over whether or not they are having second thoughts about their involvement in the crypto promotions.
AFR columnist Tiffany Hsu wrote that celebrities such as Oscar winners Reese Witherspoon and Gwyneth Paltrow jumped on board the cryptocurrency bandwagon without understanding how volatile the market was.
It is thought that they were so enthusiastic about crypto because it was more inclusive than other types of investments and that it offered investors the ability to make a lot of money.
Cryptocurrency ads were played throughout The Super Bowl this year which was nicknamed the ‘Crypto Bowl’ due to the high number of ads. It’s estimated that companies spent $10 million on a 30-second ad, many of which featured celebrities such as Matt Damon and LeBron James.
There are concerns about cryptocurrency investors following several investors losing hundreds of billion dollars this month and analysts suggest that celebrities have helped drive crypto investment.
University of Chicago assistant professor of marketing, Giovanni Compiani told The New York Times that younger, lower-income investors are more likely to be overly optimistic about the potential of crypto and not fully understand the risks.
He said that anyone who promotes crypto should be more upfront about the risks.
Since the Super Bowl, the celebrities have been silent.
Matt Damon, who partnered with Crypto.com and had compared cryptocurrency to the development of aviation and spaceflight was unavailable to comment after endorsing the virtual currency. LeBron James who starred in the company’s Super Bowl commercial was also unavailable for comment.
When contacted by the AFR for comment, both Reese Witherspoon and Gwyneth Paltrow declined to comment.
Media personality Paris Hilton, Actress Mila Kunis and many others such as Olympian Naomi Osaka who was the ambassador for the crypto exchange FTX were also unavailable for comment.
FTX ran a Super Bowl commercial where comedian Larry David criticised inventions such as the wheel and the light bulb before rejecting crypto. The ad ended with the statement, “Don’t be like Larry”.
Johnny Depp, Hollywood star, musician, and also blockchain collaborater has worked with blockchain project TaTaTu. The blockchain startup looks to reward users with tokens and rewards for engaging with films and games. The company partnered with Depp in 2018, but it is unknown if the relationship still stands.
The ad’s director, Jeff Schaffer replied to an email from the AFR saying that neither he nor David had any comment to make and even told the AFR that he wouldn’t know what to say because he wasn’t sure how cryptocurrency works, doesn’t invest in the market and just set out to make an entertaining commercial.
Unlike handbags, clothes or snacks, celebrity endorsement of crypto is rife with risks and people should be wary.
Just because a celebrity is endorsing it does not mean that you should invest in it.
Beth Egan, an associate professor of advertising at Syracuse University said that celebrities get paid to endorse products but it does not make the product worth buying, or in this case, investing in. She also warned that if the crypto market tanked the celebrities’ reputation could also suffer and that they should be careful before endorsing any products.
What to know before you invest
If you still want to invest in cryptocurrency then the Australian government’s MoneySmart website has some general advice that you should follow before you invest.
Review your finances
You should know what your incomings and outgoings are before you invest. This will help you determine how much money you can put towards future investments.
Set your financial goals
Write down your financial goals and break them down into short term, medium-term and long term. Knowing where you are headed will increase the likelihood that you will achieve them.Understand the investment risks
This goes for any investment, not just cryptocurrency. It is worth researching the market before you invest your hard-earned dollars. Cryptocurrency is riskier than other types of investments so you should understand the risks before parting with your money.
You should also know what your risk tolerance is. That is to say, it’s worth knowing how you would feel if you lost 20% of your investment overnight. If you couldn’t tolerate it then it might be better to consider a safer investment rather than cryptocurrency.
Research your investment options
To find out the best investments you need to consider return, timeframe, risk, access to cash, cost to buy and sell and tax.
Build your portfolio
Diversifying your investment portfolio helps you minimise your risk. If you’ve already got shares and cash then it may not hurt to invest some of your spare money in cryptocurrency.
Monitor your investments
Keeping a regular eye on your investments will help you make future decisions and understand the market. If in doubt, contact a financial advisor who can develop an investment strategy specifically based on your situation.