The frenzy around meme stocks is back, echoing the headiest highs of last year — and it’s spilling over into meme cryptocurrencies such as dogecoin and shiba inu.
Home retailer Bed Bath & Beyond (BBBY) has surged up to 360% in August, including a 67% rally on Tuesday, after Redditors were inspired by GameStop chair Ryan Cohen’s sizable stake in the firm.
Cinema chain AMC has also seen a resurgence, having jumped almost 47% in the month to date, as of Wednesday’s close. Retail investors last year saved the firm from bankruptcy and thwarted its short sellers.
Game retailer and seminal meme stock GameStop (GME) has also found fresh retail interest, albeit relatively smaller, with 19% gains over the same period.
These moves represent a turnaround in risk assets from a relatively quiet July, when the macro environment was more tense. In the past few months, markets remained spooked by tighter monetary policy to combat soaring inflation and warnings about the onset of a recession.
Recent meme stock frenzy has coincided with a jump in their cryptocurrency counterparts. Dogecoin is up about 16% this month while copy-cat shiba inu has gained 24%. For scale, bitcoin has only broken even; ether has popped 9%.
Gains in these riskier corners of the market appear to arise from market events somewhat stabilizing, with stocks climbing from their mid-June lows, according to Jae Yang, CEO of crypto software firm Tacen. Benchmark indexes S&P 500 and NASDAQ 100 are both up around 4%, led slightly by the latter.
“It seems like there’s still quite a bit of money out there that people are willing to risk, which is a good sign,” Yang told Blockworks, adding that traders tend to wait for a volatility squeezes and catalysts to push trade volumes.
Why meme coins are still relevant
In January 2021, the infamous GameStop short squeeze brought attention to stocks that were highly-shorted by Wall Street institutions. A group of Reddit traders then banded together to pump similarly embattled stocks in a meme-fueled defiant display of retail power and influence over the stock market.
Meme coins, on the other hand, refer to cryptocurrencies whose brand derives from a popular online meme or viral image. In the cases of shiba inu and dogecoin, the meme is a breed of Japanese hunting dog.
This trait is apparently more relatable to the retail investor crowd, as compared to Ethereum’s more technical octahedron, for example.
While they’re not designed to offer competition on the utility front to major players like bitcoin and ether, they are fun to trade, Santiago Portela, CEO of Web3 firm FITCHIN told Blockworks in an interview.
“I think there’s a group of people — and we’re not talking about five or 10 but in the 1000s — that really like the concept of meme coins, meme stocks and saying ‘I’m just having fun, and I want to have fun’,” Portela said.
The phenomenon of investing in dog coins first struck a major chord during the previous crypto bull run, when Tesla CEO Elon Musk began hyping dogecoin on social media.
Musk once described it as his “fav cryptocurrency,” but it’s often hard to tell whether Musk is serious (he later referred to dogecoin as a “hustle” on Saturday Night Live, causing its price to sink up to 35%).
Ethereum Merge could drive momentum alongside meme stocks
Pumping meme asset prices has led dogecoin and shiba inu’s correlation with meme stocks to rise dramatically over the past month.
Shiba inu’s 40-day correlation with AMC, for example, is now at 0.79 (with 1 being exactly correlated), up from -0.12 one month ago, according to TradingView.
Dogecoin’s correlation with GME and BBBY has made almost analogous moves — but so has ether’s and bitcoin’s. In fact, ether’s correlation with AMC is now at 0.82, way up from -0.34 recorded in mid-July.
“Meme coins are usually the ones most affected by bear markets as participants usually invest aiming to capture a speculative rally that could trigger huge returns,” said Manuel Ortiz-Olave, co-founder at tokenization platform Brickken.
Daniel Tal, project lead at crypto infrastructure startup ICHI, said the market for meme coins is wholly based on speculation, and that sentiment is currently driven by the approach of Ethereum’s Merge, which will see the blockchain switch from proof-of-work to proof-of-stake.
“While you do see larger usage of some coins like dogecoin in the last two months, I think that may have little to do with the increase in price,” Tal said.
He reasoned that ETH’s recent price growth, fueled by the Merge, has brought shiba inu and dogecoin along for the ride, “as retail users flock back to crypto with the hype around the event.”
David Canellis contributed reporting.