Perceived Trustworthiness Boosts ICO Investments, Yet Doesn't Predict Performance, Study Finds
Summary:
A study by Professor Sinh Thoi Mai from Finland's Hanken School of Economics reveals that Initial Coin Offerings (ICOs) with promoters appearing more 'trustworthy' tend to raise more funds. According to the study, trustworthiness, gauged through facial appearances, could increase investments by up to 95%. However, this perceived trustworthiness does not align with post-ICO performance. The research also suggested that facial trustworthiness plays a larger role in ICO appeal when less technical information is available to potential investors.
A financial academic from Finland's Hanken School of Economics recently revealed exploratory research suggesting that initial coin offerings (ICOs) are more profitable when those behind the offerings look more trustworthy. The study, entitled “The Value of a Smile,” was directed by Professor Sinh Thoi Mai, who discovered that ICOs featuring members who scored high on a trustworthiness scale could pull in up to 95% more funding compared with those at the trustworthiness scale's base. He noted that facial trustworthiness is positively linked with investment, with a distinctive difference of roughly $2.91 million between ICOs at the uppermost and lowest trustworthiness quintiles. Interestingly, this perceived trustworthiness doesn't correlate with the ICO's performance after the offering.
Professor Mai gathered a data set of 5,826 ICOs from diverse sources, cumulatively amassing about $24 billion. Each ICO's promotional pack included facial imagery, which was then graded for trustworthiness based on earlier empirical investigations. ICOs that had images scoring high on trustworthiness generally raised more funds. However, this initial investor enthusiasm was consistently seen after the ICO.
Professor Mai notes, “On the flip side, facial trustworthiness has a reverse relation to post-ICO performance, and influences the return on tokens within the first quarter following their exchange listing.” This suggests that investors drawn to seemingly trustworthy faces may overvalue ICOs, leading to swift sell-offs to curb losses or cash in on unrealized profits due to over-investment.
The research also established that facial trustworthiness became a more significant factor in the appeal of ICOs when less information was available, such as lower coding data on GitHub or convoluted whitepapers. This could signal that investors with limited technical insight might focus more on alternative meaningful indicators like a trustworthy-looking smile. However, while people tend to believe smiling faces are more trustworthy, no scientific evidence backs this assumption.
Published At
2/9/2024 7:04:00 PM
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