Cryptocurrency is always associated with celebrities. First there was Bitcoin under the "Trump deal", and then Musk established the Department of Government Efficiency (DOGE), which caused DOGE to rise wildly. Emerging market fund manager Mark Mobius said when trying to extinguish the public's enthusiasm for cryptocurrency, "Cryptocurrency is a religion, not an investment."
Cryptocurrency does have a certain personality cult color, but the word religion does overestimate cryptocurrency. This article will explore its impact on the cryptocurrency industry in this cycle from aspects such as the formation mechanism of the celebrity effect.
Religious Myths and Personal Cults
According to Émile Durkheim's "Elementary Forms of Religious Life", religion is a unified system of beliefs and practices related to sacred things, which are distinguished and prohibited, and these beliefs and practices unify all those who believe in them into a moral community called the church. On the one hand, we see that the currency directly endorsed by celebrities deifies the status of celebrities, especially the founder's influence on the currency is huge. On the other hand, Bitcoin is different. In the early days of Bitcoin, the mystery and symbolization of "Satoshi Nakamoto", the absentee Godhead, directly brought Bitcoin to the height of "God's creation". Today, Trump is becoming a competitor of the role of "Bitcoin Jesus" and leading the market.
However, we believe that there is a cult of personality in cryptocurrency, which is equivalent to the "myth" of religion. The cult of personality in cryptocurrency is actually fanaticism (Cult) or belief, not religion (Religion).
There is no "sacred things" that distinguish and prohibit violations of taboos in cryptocurrency, nor is there a "ritual" to strengthen the community. This article will briefly describe how cryptocurrency is formed from the cult of personality to the celebrity effect.
Even if you think that cryptocurrency is a religion, please allow us to quote the words of religious scholar Russell McCutcheon: "What is worth studying is not what religion is or is not, but the process of 'making it' itself", such as "the process by which a group makes claims about their own behavior and institutions", that is, how cryptocurrency enthusiasts advocate the cult of personality.
Mechanism of the Celebrity Effect
Charismatic Leadership
In his book Economy and Society, Max Weber, a famous German sociologist, defines charismatic leadership (also known as charismatic authority) as "the obedience to a person's extraordinary qualities of being sacred, heroic or outstanding, and the behavioral patterns that they demonstrate". Charismatic leadership is based on the leader's "extraordinary personal qualities, magical insights or achievements, and the power to attract followers to be loyal and obedient".
For example, Musk, his followers worship not only his resume, but also the sense of mission created by the projects he promotes, such as new energy vehicles and exploration of outer space. Therefore, his followers believe that supporting Musk is supporting human progress. According to a survey by Piplsay, a global consumer research platform, 37% of American adults invest based on Musk's tweets.
After following a charismatic leader, people will strengthen their belief in the celebrity through a series of self-verification.
Self-Verification
According to William B. Swann's Self-Verification Theory, in order to gain a sense of control and prediction over the outside world, people will constantly seek or trigger feedback that is consistent with their self-concept, thereby maintaining and strengthening their original self-concept.
Especially in the volatile cryptocurrency trading, traders have already assumed that "I know how to grasp the volatility of this market", and coupled with their following of charismatic leaders, it can be said that they have assumed that "I know how to interpret the prophecy of 'God'". When the cryptocurrency market price rises as the celebrity said, the individual's self-verification is further strengthened. Even the Federal Reserve is like a "temple", and people self-verify the future monetary policy through various interpretations of the ambiguous speech of "Archbishop Powell".
In addition, the belief in celebrities as "gods" and external opposition, especially in the face of polarization, further strengthens the worship of individuals. For example, during the US election, because "Kamala Harris" (Democratic presidential candidate Harris) did not propose favorable policies for cryptocurrencies in the early stage, even if she expressed a positive attitude in the later stage, the strength was not as strong as Trump. Polarization further strengthened Trump's celebrity effect, and market sentiment was extremely high after Trump's election.
After the formation of personality cult, how do psychological and ideological activities transmit to market behavior? It needs to be explained by the bounded rationality theory.
Bounded Rationality
Bounded rationality was originally proposed by Kenneth Arrow, who believed that bounded rationality means that human behavior "is consciously rational, but this rationality is limited." Human rationality is limited, firstly due to environmental uncertainty, that is, incomplete information sources; secondly, due to human limited computing and cognitive abilities for the environment and information; thirdly, due to the fact that people often process information using the first signal system (realistic, concrete stimuli, such as sound, light, electricity, and taste, as opposed to the second signal system composed of language and text) rather than using rationality to process information.
Faced with the huge and complex system of the cryptocurrency market, people tend to simply believe in the "deified" charismatic leaders to reduce decision-making costs. The movements of celebrities have become the most weighted information source for followers. Therefore, when making investment choices based on the information database, following the trend has become the optimal solution for followers.
These deified leaders are divided into different levels because of the information cocoons created by advanced social media. Famous ones such as US President Trump and "Iron Man" Musk have influenced billions of users around the world. The tokens related to them have risen because of their little actions and words. Even a KOL with thousands of fans can shout orders for an unknown currency in his "wealth group", and everyone will like this wealth code in the group.
Everyone has his own "god".
This is especially obvious in Meme coins. People are unwilling to think about the complex investment logic and asset value, and are only willing to immerse themselves in the wealth fantasy and anxiety brought by the so-called KOL, doing the same group behavior in various information cocoons. Even through the call of celebrities, the essential object of people's worship may have surpassed a specific person, but an animal, a popular symbol or a story "deified" by the Internet.
At this point, the cult of personality has been formed.
The value and risks of the celebrity effect
Catalysts for short-term outbreaks
On the one hand, the celebrity effect has a short-term promoting effect on cryptocurrencies.
Celebrities’ shouting can increase the exposure of some assets. In the era of information explosion, the attention of the public is of great value. Attracting the attention of potential investors is the basis for the good performance of the secondary market of assets.
Celebrities’ support for cryptocurrencies can also significantly boost market sentiment and attract new capital inflows, thereby promoting short-term outbreaks.
For example, Trump returned to the White House and unprecedentedly supported Bitcoin as a reserve asset in the United States, which instantly raised market expectations and promoted the rise of the market. The market value of Dogecoin has been pushed from obscurity to tens of billions of dollars, which is inseparable from Musk’s “unwavering commitment” back then. Especially for Meme coins, if they succeed in creating a "god", then this explosive power should not be underestimated.
Over-binding amplifies risks
On the other hand, there are risks in binding cryptocurrencies to projects. First, over-binding to specific celebrities may amplify risks. Although the halo of celebrities can bring opportunities to cryptocurrencies, celebrities may also bring risks. The traffic attracted by celebrities may accelerate the outbreak of crises. For example, celebrities are in a disadvantageous position, which may cause holders to panic and stampede. Secondly, taking a step back, even if the celebrities do not turn over, the long-term value cannot be guaranteed. What determines the long-term value is the potential of the ecosystem itself. Whether it can attract the continuous inflow and interaction of long-term funds is the real problem.
After the inflow of short-term funds, if the celebrity effect is lost, the evaporation of value will be a severe blow. You can certainly easily imagine what will happen to DOGE without Musk.
From Unification to Decentralization
So how to apply the celebrity effect to better grasp its positive aspects for cryptocurrency?
We believe that the development form of communities and projects should change from unification to modularization and decentralization. In the early stage, strong leaders will lead the growth, which can lay a good foundation for traffic; in the middle and late stages, DAO (decentralized autonomous organization) is more suitable, which can effectively reduce risks while maintaining effective leadership and promoting the steady development of the cryptocurrency ecosystem. Of course, to complete the transformation, the project also needs to go through a period of pain, and the projects that can be completed are the real value targets worth investing in.
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