I saw a genuinely disgusting video today on Twitter of some TikTok creator named Matt Lorion giving his viewers financial advice on how they can "buy a million-dollar home for half the price" using cryptocurrency.
In it, Lorion claims he would be able to buy a home worth $1.4 million just by 1) paying a 20% down payment of $290,000 and 2) putting $450,000 into the crypto-powered Anchor Protocol, which offers an APY of 19.55%. This return would theoretically give him enough money every month to cover the roughly $7,200 monthly payment on the house. He explains this scenario as if it's a guaranteed, foolproof plan that can be used by anyone who "knows how to utilize cryptocurrency," in the sort of demeaning tone that screams, "I see two types of people in the world: the people who own crypto and the peasants."
What Lorion doesn't tell you is that — and I know this might be a shocker — the Anchor Protocol is littered with crazy risks. The Motley Fool has a great piece describing all of these risks very clearly. Most importantly, the Anchor Protocol system could collapse completely if the UST stablecoin it is based around loses its peg to the dollar, and guess what: that happened in a fashion even more dramatic than any of us could have dreamed. Last month, the UST's price plummeted from its supposed locked price of $1.00 to literally two cents as of today. Matt Lorion went from a good-looking twenty-something-year-old in a $1.4 million house to a broke crypto martyr with a $1.4 million financial coffin.
Additionally, as the Motley Fool explains, the Anchor Protocol's return rate cannot be mathematically sustainable, and investments in it are not protected by the FDIC, meaning if the Anchor Protocol fails, you lose all of your money with no chance for recourse.
Let's put it this way: if there was a genuinely safe asset class that offered a guaranteed APY of 19.55%, investors would swim across the Pacific to invest in it, and if most major investors are not investing in it, there is probably a very good reason for that. Yet people like Matt Lorion have a platform like TikTok to continue spreading these incredibly dangerous financial lies to people who don't know any better, and that could have catastrophic results as we’re also seeing with “Buy Now, Pay Later.”
I don't want to come off like I'm indiscriminately bashing all TikTok financial advisors by writing any of this. I know there are a number of creators who do genuinely great work teaching people the basics of personal finance through simple, easy-to-follow TikTok videos, and considering how rare personal finance classes are in the American education system, I see tremendous value in these sorts of supplements. My concern is that I don't trust the TikTok algorithms to sort through the personal finance gurus from the self-proclaimed crypto Yodas who can't physically comprehend a graph going down and to the right. Financial advice used to come from licensed professionals or qualified journalists who made their living off their credibility. But now it's increasingly coming from individual content creators who make their living off their charisma, not their credibility. And that's terrifying.
Do I think anyone will realistically listen to this Matt Lorion video and immediately try to buy a million-dollar home? No. They will probably keep scrolling and forget all about it after watching some crocodile jump out of a lake and spook an unexacting pack of gazelles. But nevertheless, I would love to see TikTok implement a feature to better allow users to vet content like this and make sure anything potentially misleading doesn't get disseminated widely enough that it gets seen by someone who might actually try and buy that million-dollar home.
Or we can just decide as a country that we actually want to start training our young people about basic personal finance. But baby steps. Baby steps.
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