The Effect of Celebrity Endorsements on Crypto

Abstract

We study the relation between celebrity endorsements of cryptocurrencies and their outcomes. We use initial coin offerings (ICOs) of utility tokens as a laboratory to control for heterogeneity across blockchain products. Celebrity endorsements have a substitute relation with ICO pre-sales, but increase ex-ante success, resulting in more funds raised and a greater exchange listings. We find no evidence that celebrity-endorsed ICOs have greater ex-post success and link them to red flags such as a higher likelihood of scams. We identify specific properties of celebrities' social media endorsements driving these results. Our findings highlight the need for investors and celebrities to better understand the risks of cryptocurrencies and to conduct due diligence before endorsing or investing in digital assets.

Keywords: Celebrities, Promotions, Endorsements, Cryptocurrency, Blockchain, Initial Coin Offerings, Digital Assets

JEL Classification: G12, G14, G41