A recent preprint research paper by Professor Sinh Thoi Mai from the Hanken School of Economics in Finland sheds light on the influence of perceived trustworthiness of individuals on the success of initial coin offerings (ICOs).
Titled “The Value of a Smile,” the paper reveals that ICOs tend to attract more investments when the individuals associated with them have facial features perceived as more trustworthy. According to the research, ICOs featuring images of individuals ranked higher on a trustworthiness scale garner up to 95% more investments compared to those with lower trustworthiness rankings.
The study analyzed a sample of 5,826 ICOs collected from various sources, with a total raised amount of approximately $24 billion. Facial images from investor packets of each ICO were evaluated for trustworthiness based on indicators derived from previous empirical research.
The findings indicate a positive correlation between facial trustworthiness and investment, with ICOs featuring individuals perceived as more trustworthy attracting higher capital. However, this perceived trustworthiness does not translate into post-ICO performance.
Interestingly, the research notes a negative association between facial trustworthiness and post-ICO performance, particularly concerning token cumulative returns in the three months following listing on exchanges. This suggests that investors drawn to trustworthy faces may overestimate ICO values, leading to a tendency to sell off quickly post-ICO.
The study highlights that facial trustworthiness plays a more significant role in ICO attractiveness when there is less information available. For instance, ICOs with limited coding information on platforms like GitHub or complex white papers tend to rely more on perceived indicators such as trustworthy facial expressions.
While the research underscores the role of facial trustworthiness in shaping investor decisions, it acknowledges the lack of scientific evidence supporting the notion that people who smile are inherently more trustworthy. However, it suggests that investors may perceive trustworthy facial features as meaningful indicators, particularly in the absence of other information.
In conclusion, the study underscores the nuanced dynamics influencing investor behavior in the cryptocurrency space and highlights the potential impact of subjective factors on investment decisions.
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