The Effect of Celebrity Endorsements on Crypto: Evidence from Initial Coin Offerings (ICOs)

Abstract

We study the relation between celebrity endorsements of initial coin offerings (ICOs) and their outcomes. Celebrity endorsements have a substitute relation with pre-sales, but increase ex-ante success, resulting in more funds raised and a greater exchange listings. We find little 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 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