Crypto Crash: Will it fade the shine of star endorsers?
Cryptocurrency brands and exchanges are undergoing their worst phase so far.
Popular exchange CoinDCX signed popular young actors Ayushmann Khurana and Disha Patani last year as the face for its campaign ‘Future Yahi Hain’. CoinSwitch Kuber had roped in top star Ranveer Singh for their #KuchTohBadlega ad films.
An estimated 15-20 million retail investors in India joined the crypto bandwagon last year amid a record-setting bull run in the market and aggressive customer acquisition campaigns by well-funded crypto trading platforms.
Indian crypto trading exchange “Bitbns” roped in five celebs-Alok Nath, Anup Jalota, Shivaji Satam, Archana Puran Singh and Sreesanth-associated with diverse fields of comedy, music, drama and cricket-to latch on to people across all genres.
Cut to July 2022, the scene has completely changed. All major exchanges are witnessing intensive sell-off amid taxation rules (1 per cent TDS, 30 per cent on gains), high inflation (above 7 per cent) and regulatory uncertainty. Leading players including CoinDx, CoinSwitch and Bitbns have imposed a curb on withdrawals citing regulatory issues, leaving hundreds of thousands of investors into panic.
Additionally, they are being probed by the enforcement directorate (ED) for the alleged violation of Foreign Exchange Management Act (FEMA), further raising the stress levels of the investors. ZebPay and WazirX faced an ED probe last year.
Crypto currencies too are in trouble. Salman Khan backed-GARI has plunged by more than 80 per cent in the last six months. GARI, launched by homegrown short-video app Chingari, went live on 12 crypto exchanges in January only.
Bitcoin’s price fell by 70 per cent, Ethereum’s price by 48 per cent and Luna has lost almost its entire value since November 2021. They were backed by global tycoons like Bill Gates, Mark Zuckerberg and Sir Richard Branson.
The cryptocurrency markets worldwide have crashed with billions of dollars wiped out taking the total market value of cryptocurrencies below $1 trillion in just a year from $3 trillion in 2021, according to a Forbes report.
The average daily transaction volume on WazirX, CoinDCX, BitBNS, and Zebpay dipped to $5.6 million by July first week from $ 10 million dollars in June end, reports say. The trade volumes on BitBNS and CoinDCX crypto exchanges dropped to ⅓ and 90 percent respectively.
“The mayhem is forcing Indian investors into a selling spree. I wish I had not fallen for the reckless campaigns by my favorite actors and cricketers,” rues a young IT engineer, who had lost his entire savings into Crypto markets.
Big lessons for investors
Crypto brands have been using celebrity power to target the pulse of the youth and to penetrate deeper into the country. Apart from film stars and cricketers, an army of major and micro-influencers have also been pushing crypto brands since last year. Based on glowing advertisements by celebrities and reviews by influencers on social media, several millennial investors invested small to large sums in cryptocurrencies.
The development is a big lesson for investors, who fell for glitzy crypto advertisements by popular actors and celebrities last year. This also raises question marks about advertising blitzkrieg by the brands.
“While most of the ads with celebrities play off the celebrities’ star power and talk about benefits of investing in cryptocurrencies, they do not have adequate warnings for investors on the risks and volatility in these instruments,” says Lloyd Mathias, Business Strategist and Angel Investor,
Shradha Agarwal, CEO and Co-Founder of Grapes, says, “As celebrities have a promising mass appeal, endorsing such advertisements requires a lot of responsibility. Considering that crypto is a very new concept, it is important that celebrities mention the risks associated with the sector. As consumers invest huge faith and follow celebrities blindly, it is required they have knowledge about the industry before promoting it to not misguide the consumers.”
Crypto brands have unanimously paused their advertising activity following recent guidelines issued by the ad regulators and the sector has constrained its ad spend substantially, she said.
Sourodeep Banerjee, Associate Creative Director, The Rabbit Hole (Zoo Media), has a different point of view.
“I think we have seen some pretty fun campaigns coming out of India, with CoinDcx’s ‘Bitcoin Liya Kya’ being my absolute favourite in the category. With the new guidelines, I think advertising anything crypto will have to be smarter and more aggressive. Anyone who knows anything about crypto and other virtual digital assets is aware of its volatility, so these disclaimers will not discourage the potential crypto investor, but rather reinforce the risk factor,” Banerjee says.
He adds, “However, not being able to use words like currency and securities is definitely going to be a thorn in the bed for advertisers in the future.”
Currently, the crypto market is volatile, especially after the new regulations. Along with the prices of cryptocurrencies, we have seen a dip in marketing efforts. That shouldn’t be the case. I think spreading awareness and educating people should be the way to go for crypto brands. This is the time to create a positive environment in the market,” advises Shrenik Gandhi, Co-Founder and CEO, White Rivers Media.
Regulations came as deterrent
There was no law in place until a month ago that prohibited celebrities from endorsing products that are volatile in nature. The Union government recently amended rules to make misleading advertisements a punishable offense.
The Advertising Standards Council of India (ASCI) also framed guidelines for advertising the virtual digital assets (VDAs), commonly referred to as crypto or non-fungible tokens (NFTs), that mandate putting a disclaimer alongside the ad or influencer post: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions…. This needs to be carried out in a prominent and unmissable way in campaigns for products and services.”
Dr Sandeep Goyal, MD of Rediffusion, says, “Celebs endorsing cryptos have stopped doing such ads since the ASCI and then the Consumers Affairs Ministry released new guidelines on misleading ads early this year. Even if they endorse cryptos in the future, they will have to do due diligence or else they will face legal consequences.”
Does the mayhem impact celebs’ brand value?
Dr Goyal rejects the suggestions that the downturn in cryptos will impact the brand value of endorsers.
In India, celebrities are not held liable for the products they endorse unless the products directly affect the physical health of people, says Banerjee.
Banerjee points out, “Amitabh Bachchan and Akshay Kumar have gotten huge backlash over the products they have endorsed with negligible hits to their stardom. And Sachin still says ‘Mutual Fund Sahi hai’ even though the Sensex has bottomed quite a bit.”
Banerjee says it would be interesting to see how Indian celebrities are leveraging NFTs.
“Sunil Gavaskar, Salman Khan, and the KGF franchise have had decent success in this sphere. And even owning iconic cricket moments on fan craze which claims to be an officially licensed cricket NFT collection has seen the likes of Rohit Sharma and Hardik Pandya endorse it on TV. So celebs are confident that their stardom isn’t going to be affected in the long term by associating with web 3.0 in any form,” he explains.
Crypto Brands Confident
Despite massive challenges, Indian cryptocurrency companies are confident of early revival. WazirX and ZebPay published a trader sentiment survey recently to highlight how further reforms would promote the industry and its participants.
According to their trader sentiment survey, 27% respondents had already sold 50% of their portfolio before April 1, 2022. Over 83% traders felt the recent tax move had deterred their trading frequency.
A CoinSwitch Kuber Spokesperson told e4m, “Whenever markets go through a bear phase, as is the case currently, belts need to be tightened. The crypto sector is no different. Companies will reassess budgets and spends, and that is quite apparent now.”
He added, “However, this is the best time to dig in and build. It is also a very good time to effectively use various communication channels to enhance awareness and educate customers/users on cryptos, so that they are better informed in the choices they make. DYOR has been central to CSKs advertising and Comms and we will continue to do so.”
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