ICOs with smiling members raise up to 95% more money

A professor of finance from the Hanken School of Economics in Finland recently published preprint research indicating that initial coin offerings (ICOs) tend to make more money when the people offering them appear to have more “trustworthy” faces.

Dubbed “The Value of a Smile,” the paper’s author, professor Sinh Thoi Mai, claims observed ICOs with member images that rank highly on a trustworthiness scale earn up to 95% more investments than those at the lowest end of the scale:

“The results show a positive correlation between facial trustworthiness and investment, with the average capital raised differing by approximately $2.91 million (95%) between the top and bottom quintiles of ICOs ranked by trustworthiness. Notably, this perceived trustworthiness is unrelated to post-ICO performance.”

The professor manually collected a sample of 5,826 ICOs “from various sources,” with a total amount raised of around $24 billion. Facial photo images from each ICO’s investor packets were then evaluated for “trustworthiness” using indicators from previous empirical research.

ICOs featuring images that scored higher on the trustworthiness scale typically raised more money, but the initial investor interest was reflected post-ICO.

“Additionally, facial trustworthiness is negatively associated with post-ICO,” writes Mai, adding that “token cumulative return during the three months after the tokens are listed on exchanges.”

This indicates that investors attracted to the most trustworthy faces may overestimate ICO values, thus driving a tendency to sell off quickly in hopes of recouping losses or unrealized gains due to overinvestment.

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The study also found that facial trustworthiness played a greater role in ICO attractiveness when there was less information available, correlating to less coding information on GitHub or more complex white papers.

This could mean that investors with less technical knowledge are more likely to search for other indicators perceived as meaningful, such as a trustworthy smile on an image.

Ultimately, there’s no science to support the idea that people who smile are more trustworthy, though research does show that people often believe they are.