CelebdaqWhy Celebrity Popularity Could Be the next Asset You Trade

Why Celebrity Popularity Could Be the Next Asset You Trade

Traders of a certain vintage might recall Celebdaq, the BBC-created online celebrity stock exchange with accompanying TV show that became a huge hit in 2003.

Punters could back stars including Zoe Ball, Eminem and David Dickinson, and then watch the value of their investments rise or fall depending on developments in these individuals’ careers and their extracurricular behaviour.

All Celebdaq trading was done with pretend money. If you made £50m or £100m you might be awarded an “Executive Jet” or “Exotic Island”, but sadly these were only imaginary. Sometime soon, however, you could profit, or lose out, for real from the ups and downs of celebrity lives.

It’s the rise of cryptocurrencies in recent years that has spurred this kind of trading. Adding the freedom to create new ways to store and exchange financial value to our celebrity-obsessed culture has inevitably led to experiments with star-related investments.

One way already out there to trade in relation to celebrity popularity is TokenStars. This company, which launched last year, uses blockchain – the technology behind cryptocurrency – to offer a way of backing sportspeople and, with luck, profiting as they become famous. If you’re more into politics, you can take your pick of world leaders. Donald Trump, Vladimir Putin and even Theresa May all have cryptocurrency coins named after them.

Other opportunities to trade in celebrity popularity are likely to come on to the market. Alex Amsel, founder of blockchain-powered gaming trading platform Ownage and a cryptocurrency enthusiast, is convinced that someone will develop a more sophisticated system within the next few years.

Amsel recently wrote a Medium blog on this topic, outlining how such a system could work. In a nutshell, he proposes that a new cryptocurrency could be created and distributed to a community of interested users. They could then put their allocations in various investments linked to individuals with a Wikipedia entry or popular Twitter profile.

He has also considered how some of the potential hurdles that such a system might face could be overcome. First, there’s the issue of whether such a system would have the right to use a celebrity’s name. A cryptocurrency called “Coinye” that used imagery associated with hip hop star Kanye West had to be abandoned last year following legal action from West.

But Amsel thinks the decentralised nature of cryptocurrency means that this issue will eventually disappear, whether or not celebrities approve.

Then there is the more serious problem of how to put a fair value on celebrity popularity. He points out that any current trading opportunities in this area, such as some of the world leader coins, derive their value purely from arbitrary market demand. Prices go up as more people buy into an celebrity popularity asset, and fall as they sell out.

“Unless [value] is based on a more complicated mechanic – which I’d like to to see in the future – it’ll be based on the speculative nature of what’s going on,” says Amsel. This is a problem because it leaves the system vulnerable to manipulation and extreme price fluctuation.

Amsel suggests one fix would be to smooth market value by generating it from a combination of current market prices plus other factors. These could include how much press coverage a celebrity is getting, or what type of traders are buying and selling their coins.

He suggests that mechanisms creating or destroying currency under certain circumstances could be used to regulate value automatically. But this, he thinks, would be difficult to implement in practice.

So once such a system is up and running, how might traders approach it? As with trading any asset, key principles such as doing your research thoroughly and timing your trades well would apply. If Roger Federer is doing well in the US Open “you can guarantee his reputation is going to go up on that basis” says Amsel.

But celebrity popularity will always be a complex and volatile asset. “You’re talking something that's closer to gambling than getting dividends,” says Amsel. Tempted to trade here? As you start poring over Hello! and Instagram, consider yourself duly warned.