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YouTube ‘crypto-influencers’ shown to have short-term impact on small-cap trading

The price and trading volume of lower value crypto coins and tokens are being impacted by ‘crypto-influencers’ on YouTube, but only in the very short-term, according to a study involving the Centre for Finance, Technology and Society at Nottingham Business School (NBS), part of Nottingham Trent University.

Hand holding a mobile phone with trading information on the screen
Investors are advised to proceed with caution when watching YouTube for cryptocurrency investment advice

Over a six-month period, researchers from NBS and the University of Klagenfurt in Austria watched more than 1,000 videos released by cryptocurrency-focused YouTube channels with more than 200,000 subscribers.

Although all crypto YouTubers stress that they never provide financial advice, they often advertise coins as being ’gems’ or a ‘100x’ token – a coin which has the potential to increase in value by up to 100 times. Some channels also offer ’shopping lists’, thereby promoting specific coins and tokens.

The researchers focused on mentions for select coins or tokens with a sufficiently small market capitalization - less than USD 100 million at the day the YouTube video was released - and investigated trading behaviour in terms of daily dollar trading volume for each coin or token 45 days before the mention and five days after.

While findings showed no differences prior to or on the day of a video release, a positive and highly significant average abnormal returns of 7.0% across the entire sample was observed the day after a video was published. This lag can be explained by the timing of videos released by US based channels in the afternoon, meaning that even coins bought immediately after the video will be attributed to the next day due to universal time cut off, as well as delayed views by subscribers.

Alexander Brauneis
Professor Alexander Brauneis

Results also showed that the magnitude of price reactions as a result of the YouTube content appears to be inversely linked to the coins’ market capitalisation. One day post-release ‘tiny’ coins exhibit above average returns of almost 9%, while the numbers for ’middle’ and ’big’ coins are only 7.5% and 3.7% respectively.

However, this affect was seen to be short-lived, as prices reverted and trading volume returned to pre-release levels in just three days, with day three showing above average returns of almost negative 3.0%.

Alexander Brauneis, Professor of Finance and Innovation at the Centre for Finance, Technology and Society, said: “New crypto projects are being released every day, so even experienced investors can struggle to keep up with every single potentially lucrative coin. It is therefore reasonable to assume that many retail investors will rely on information provided by specialized YouTube channels and, in such a clickbait-shaped environment, their interest may be drawn to actually investing in the tokens mentioned in these videos.”

“Our findings point to a substantial increase of token prices in the wake of the release of a video, showing that the people running these channels can be considered as ‘crypto-influencers’ as they influence or even create extra demand for coins they choose to cover.”

“Furthermore, many of the tokens covered in these videos are low capitalized and hence are likely illiquid, amplifying the YouTube induced impact on prices and trading volume.”

“Investors should proceed with caution however, as we see evidence that these rises are not sustained and are, in fact, very short-term.”

The full paper Should you listen to crypto YouTubers? is available to read online.

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    About Nottingham Business School at Nottingham Trent University

    Nottingham Business School (NBS) at Nottingham Trent University (NTU) is a leader in experiential learning and personalisation of business, management and economics education and research, combining academic excellence with positive impact on people, business and society.  NBS has an unrivalled level of engagement with business, public and voluntary organisations. With more than 8,500 students, NBS is also one of UK’s largest business schools.

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    About Nottingham Trent University

    Nottingham Trent University (NTU) received the Queens Anniversary Prize for Higher and Further Education in 2021 for cultural heritage science research. It is the second time that NTU has been bestowed the honour of receiving a Queen’s Anniversary Prize for its research, the first being in 2015 for leading-edge research on the safety and security of global citizens.

    The Research Excellence Framework (2021) classed 83% of NTU’s research activity as either world-leading or internationally excellent. 86% of NTU’s research impact was assessed to be either world-leading or internationally excellent.

    NTU was ranked second best university in the UK in the Uni Compare Top 100 rankings (2021/2022). It was awarded Outstanding Support for Students 2020 (Times Higher Education Awards), University of the Year 2019 (Guardian University Awards, UK Social Mobility Awards), Modern University of the Year 2018 (Times and Sunday Times Good University Guide) and University of the Year 2017 (Times Higher Education Awards).

    NTU is the 5th largest UK institution by student numbers, with nearly 39,000 students and more than 4,400 staff located across five campuses. It has an international student population of 7,000 and an NTU community representing over 160 countries.

    Since 2000, NTU has invested £570 million in tools, technology, buildings and facilities.

    NTU is in the UK’s top 10 for number of applications and ranked first for accepted offers (2021 UCAS UG acceptance data) It is also among the UK’s top five recruiters of students from disadvantaged backgrounds and was the first UK university to sign the Social Mobility Pledge.

    75% of NTU students go on to graduate-level employment or graduate-entry education / training within fifteen months of graduating (Guardian University Guide 2021).

    NTU is ranked 2nd most sustainable university in the world in the 2022 UI Green Metric University World Rankings (out of more than 900 participating universities).

YouTube ‘crypto-influencers’ shown to have short-term impact on small-cap trading

Published on 29 March 2023
  • Category: Press office; Research; Nottingham Business School

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