Meme stocks and cryptos were all the rage during the 2020 Lockdowns with the economy shut down, and the Fed and their Western-aligned central banks created unprecedented currencies.
M2 took a vertical launch along with some meme stocks and meme cryptos.
Do you recall the shares in US video game retailer, during the meme stock frenzy, GameStop skyrocketed from less than $US20 to more than $US500 per share within a month in 2021?
Definition of a meme
The word meme comes from the Greek mimema, meaning something imitated.
A meme can be an image, video, or text, typically humorous, copied and spread rapidly by internet users, often with slight variations.
“A meme can be an image, video, or text, typically humorous, copied and spread rapidly by internet users, often with slight variations”
WIN INVESTING
Where do meme cryptos and stocks lie on the investor risk scale?
Memes have no fundamentals, are more of a fad or a cult and are very volatile. GameStop (NYSE: GME) · AMC Entertainment (NYSE: AMC) · BlackBerry (NYSE: BB) are just a few which come to mind.
But don’t bet the farm on meme stocks and cryptos, bearing in mind their prices can rise and deflate just as fast.
Debbaling in memes is identical to gambling, where there is a real risk of you losing all your money.
So, only allocate an amount of funds you can lose without a detrimental impact on your lifestyle and goals.
Similarly, investors shouldn’t ignore meme stock and cryptos in their portfolios as the potential short-term upside is unparalleled.
“Memecoins – whether you’re a fan or not – have become a cornerstone of the crypto economy… In today’s market, they’re one of the most powerful narratives”
MIKE NOVOGRATZ
Meme cryptocurrencies on permissionless blockchains have an aggregate market cap of more than $60 Billion
“Memecoins – whether you’re a fan or not – have become a cornerstone of the crypto economy… In today’s market, they’re one of the most powerful narratives,” said Galaxy Digital CEO Mike Novogratz.
He notes two ways to make a fortune in meme coin investing; “just have that quirky sense of humour, look at something and say people are going to laugh at that, people are going to love that,” he said.
“The 2021 meme stock frenzy would not have occurred, and the meme term would not have entered the public consciousness without the central bank’s loose monetary policy”
– Win Investing
Popularity of meme stocks
Meme stocks gained popularity among retail investors through social media Internet memes shared among traders on platforms such as Reddit’s r/wallstreetbetsicrease meme stock popularity.
Investors in such stocks are often young and inexperienced investors.
Driving force of meme stocks and cryptos
The 2021 meme stock frenzy would not have occurred, and the meme term would not have entered the public consciousness without the central bank’s loose monetary policy.
So rocket fuel for meme stock and crypto rallies is the central bank loosening in the form of stimulus cheques .
The meme phenomenon would not have been born without central bank liquidity showering the public with money.
The right side of the human brain triggers the meme crazy
Right-brained activity is the artsy, creative and emotional side that attracts people to memes.
So, a person’s decision to dabble in memes has no basis in logic or analytical fundamental reasons. Doing due diligence as an investor is non-existent for meme buyers driven by emotion and the right side hemisphere activity. Americans are highly emotional, and they tend to identify emotions with authenticity. So, it is no surprise that the meme crazy was born in the USA.
“If central bank liquidity is the rocket fuel for meme stocks and cryptos then social media is the launching pad” – Win Investing
What makes meme stocks and meme cryptos
Fads, cults and greed are part of the meme craze cocktail.
Fads are all defined as an intense and widely shared enthusiasm for something, especially one that is short-lived; a craze.
Fads happen when many people embrace a trend but then lose interest just as rapidly.
Cults can create memes, an organized group whose leaders dominate cult members through manipulation and pressure tactics.
Cult leaders are seen as non-mainstream, coming from the fringes, rebels with a cause, and a counter-culture challenging the status quo.
So you had the likes of DeepFuckingValue Calling Out Wall St. Bets on Gamestop in 2021.
Gamestop meme crazy is a digital movement, likely having its origins in the Occupy Wall Street OWS populist movement against economic inequality, corporate greed, big finance, and the influence of money in politics.
The gaming crowd were unhappy about Gamestop’s brick-and-mortar closures, which provided local areas for like-minded gaming enthusiasts to meet. Moreover, the idea that the hedge funds were circling the waggon, shorting the stock, got the cult leader to manipulate an army of newly minted traders with stimulus cheques to buy the stock.
The cult leaders’ strategy was to trigger a short squeeze, where a sharp rise in Gamestop price forced hedge funds who previously sold short to close out their positions. So, you had a million-plus army of populist traders strapped on their backs with stimulus cheques, driven by ideology (the most impactful human emotion) and not greed, to maybe lose it all but stick it to the Wall Street hedge funds.
Cult leader Keith Gill, known on Reddit under the username DeepFuckingValue (DFV) turned his cult followers into diamond hands, with many 10X their money but still holding as the hedge funds were unable to meet their short-margin calls and ended up forced buyers.
Despite huge gains, cult members refused to sell and were known as Diamond hands, no sellers and the fear of missing out (FOMO) crowd buying, GameStop skyrocketed from less than $US20 to more than $US500 per share within a month.
A string of ragtag traders became instantly wealthy. It was a modern-day Robin Hood story.
Social media and meme
If central bank liquidity is the rocket fuel for meme stocks and cryptos then social media is the launching pad.
The ability to connect with thousands of people instantaneously with a click of a mouse and the ease of setting up online brokers have facilitated the meme phenomenon.
The takeaway of memes is that they are extremely risky in the volatile category and are part of modern finance driven by central bank liquidity in a social media world and online retail broker world.
To win, you have to play, but play with what you can afford to lose.
