This year, stocks such as movie theater chain AMC Entertainment and video game retailer GameStop (GME) have become tools for individual retail traders to express their opposition to the so-called “free market.”
Since late January, driven by the sentiment of the Reddit community such as r/Wallstreetbets, these memes stocks have seen tremendous growth this year. GameStop’s year-to-date return was 1,069.80%, while AMC’s return was 1,919.34%. At this rate, their annual returns should be 2,440% and 4,378%, respectively.
Around the same time, Bitcoin (Bitcoin) For the first time ever, the adventure broke the $50,000 mark The now infamous GME short squeeze with Tesla buys $1.5 billion worth of BTCAlthough the price momentum of BTC continued to reach its all-time high of US$64,889 on April 14th, at the time of writing, it severely collapsed and reached its pre-surge level in early January at approximately US$35,000.
The relevance of GameStop/AMC and BTC is unclear
On June 1, AMC stock started to rise again, and its value more than doubled within a day. The stock rose from nearly $30 to a high of $65.57 during the midday trading session on June 2. BTC also rebounded slightly from a level of less than US$35,000 on the same day to reach the range of US$38,600 on June 3.Stocks and cryptocurrencies are usually traded purely based on market sentiment, and there seems to be a correlation in past upward trends, so the assessment Correlation between the two,if so.
Martin Gaspar, a research analyst at the digital asset exchange CrossTower, told Cointelegraph, “There does not seem to be a big correlation between GME/AMC stock prices and Bitcoin prices. In the brief squeeze we saw earlier this year, GameStop and BTC The increase in prices is probably a coincidence.”
Regarding the prospects of AMC in the near future, he added: “AMC is likely to become the new GameStop. Online stock forums and memes show that although the price of AMC has soared relative to fundamentals, many traders seem to believe it .”
Due to the recent AMC’s emoji mania, the company even got a upgrade In the credit rating. According to analysts at Standard & Poor’s Global Ratings, the company is less likely to default after the memetic frenzy by raising cash in the stock market. It sold 11.55 million shares at an average price of $50.85. Although the company’s bonds belong to the most speculative bond category, and are very close to defaulting or close to defaulting companies, Standard & Poor’s upgraded its rating to CCC+, which is two levels higher than the previous level and seven levels lower than investment grade—— That is, BBB-.
In addition to the relevance aspect, Gasper also commented: “We have also seen the price of BTC weaken recently, while the price of AMC has soared, further emphasizing this relationship.”
Due to the inherent volatility of the cryptocurrency market, the existence of the correlation between GME/AMC stocks is usually difficult to prove in detail. Johnny Lyu, CEO of KuCoin, a cryptocurrency exchange, told Cointelegraph:
“For those traders who know how to benefit from high-risk transactions including Bitcoin, there are only similarities between these assets, they are under pressure from regulators and influencers, and assets that allegedly have no real prospects. The price volatility of Bitcoin and stock memes is very familiar to the veterans of the cryptocurrency market-they have risen and fallen sharply in action.”
AMC’s stock price rose by 95.22% on June 2 to $62.55. After the announcement of the 11.55 million shares offering, the stock price fell 17.92%.This, plus the fluctuations seen GameStop earlier this year, Proving that due to the lack of fundamentals and information disseminated on Reddit, these stocks may have any situation.
Although, CNBC host Jim Cramer I am crazy about money, It has been shown that this may be the right time to enter GameStop and AMC, although he warned that “if you have already ridden them from a much lower level, please stay away from the table. These stories will always be interrupted.”
Do Kwon, co-founder of Terra, a stable currency protocol linked to fiat currencies, elaborated on the relationship between Reddit and these stocks. He told Cointelegraph, “Both are [GME and AMC] Reflecting the disappointment of retail investors in the current high-frequency trading [high-frequency trading] Incumbents and asymmetry in the TradFi world. He further added: “It is not surprising to see that this situation continues to happen with other assets in the future, especially with the development of social media and the way people organize and interact online. “
Speaking of stocks that have a clear correlation with Bitcoin, MicroStrategy (MSTR) is the first stock that comes to mind because of its large Bitcoin reserves and the highly bullish stance of its CEO and founder Michael Saylor. The company holds 92,079 BTC, valued at more than $3.4 billion, accounting for 0.43% of the maximum supply of 21 million tokens.
The company is one of the first listed companies Add Bitcoin to its balance sheet It is also regarded as an agent of BTC by investors in traditional financial markets. Lyu further stated, “The stock of a company that owns Bitcoin depends on its value. MicroStrategy has fallen as much as 10% this week; Bitcoin lost the same amount. When you have 90,000 BTC, it’s okay.”
In fact, MicroStrategy is included in Morgan Chase’s Cryptocurrency Exposure Basket (CEB), which is a portfolio of debt instruments consisting of 11 unevenly distributed stocks. These stocks are either issued by companies that hold BTC on their books as treasury assets, or they are related to cryptocurrencies in an auxiliary manner.
In addition to MicroStrategy, which accounts for 20% of the total configuration, CEB also owns Square, PayPal, Nvidia Corporation, Riot Blockchain, Advanced Micro Devices, Taiwan Semiconductor Manufacturing Co., Ltd., Intercontinental Exchange, CME Group, Overstock.com and Silver Gate Capital. Gaspar further talked about the performance of CEB compared to BTC:
“Considering that the basket includes companies that are not pure cryptocurrency companies, JPMorgan’s Cryptocurrency Exposure Basket may perform better than BTC. This protects investors from changes in BTC. Nvidia is one of the companies in this basket and is currently in history. High, while BTC fell about 45%.”
The phenomenon of meme inventory drives meme coins
Regarding the impact of the meme stock phenomenon on the flagship cryptocurrency in BTC, it is currently unclear due to some seemingly coincidental movements. However, it may be a precursor to another meme coin rally similar to Dogecoin’s performance (dog) And Shiba Inu (SHIB) In early May of this year, as Gaspar said, “Traders speculated that once the cryptocurrency market regains its foothold, the memecoin may rebound.”
Importantly, the communities that pushed the meme inventory to this level were also behind the surge in the share prices of GameStop and AMC. Kwon said: “Interestingly, the fundamentals of GameStop, AMC, and DOGE are all below the standard in their related markets, but they represent a new kind of social Schelling point, which is the current limit for investors in the current system Feeling frustrated.”
However, a meme coin supported by an active and decentralized online supporter community ceases to be a meme after a certain point in time. As seen in the case of Dogecoin.
Once the demand for these meme stocks is saturated, part of this demand is likely to flow into altcoins, more specifically, meme coins. Especially through trading platforms like Robinhood, retail traders gather on the site, hoping to make money quickly, and laughing with friends while doing so.