This year, stocks like movie theater chain AMC Entertainment and video game retailer GameStop (GME) have been a means for individual retail traders to show their dissent against the so-called “free market.”
Starting at the end of January and inspired by the spirit of Reddit communities like r/Wallstreetbets, these meme shares have seen a huge increase this year. GameStop has shown a 1,069.80% year-over-year return, while AMC has shown a 1,919.34% profit. At this rate, they should get 2,440% and 4,378% returns, respectively, on a yearly basis.
Around the same time, bitcoin (B T c) surpassed the $50,000 mark for the first time Now Infamous GME Short Squeeze and Tesla’s $1.5 Billion BTC Purchase. While the price momentum of BTC reached its all-time high of $64,889 on April 14, it crashed severely to reach its pre-hike level of around $35,000 in early January at the time of writing.
GameStop/AMC’s relationship with BTC is unclear
On June 1, AMC stock began to rally again, more than doubling in value in a single day. The stock rose from nearly $30 to a high of $65.57 in the mid-day trading session on June 2. BTC also saw a minor rally from the sub-$35,000 level on the same day and reached the $38,600 range on June 3. Since stocks and cryptocurrencies often trade solely on market sentiment and appear to be correlated in their upward moves in the past, it is important to assess relationship between, if any.
Martin Gaspar, research analyst at Crosstower – a digital asset exchange – told Cointelegraph, “There doesn’t seem to be a huge correlation between the GME/AMC stock price and the price of bitcoin. In the brief squeeze we saw earlier this year, GameStop and The rise in the prices of both BTC could be a coincidence.
Regarding AMC’s prospects in the near future, he said, “AMC could very well be the new Gamestop. Stock forums and memes online are showing that many traders believe in AMC, despite its rising relative to its fundamentals.” price is.
Because of the recent meme frenzy for AMC, the company even got a upgrade in credit rating. According to analysts at S&P Global Ratings, the firm’s chances of default are slim after taking advantage of the meme frenzy by raising cash in equity markets. It sold 11.55 million shares at an average price of $50.85. Even though the company’s bonds are classified in the most speculative category of bonds, which is close to defaulting or near-defaulting companies, S&P has upgraded its rating to CCC+, up from its previous levels. two levels above and seven levels below investment grade – ie, BBB-.
Adding to the correlation aspect, Gaspar also commented, “We have also recently observed that the price of BTC has decreased, while AMC has increased, further underlining this correlation.”
Due to the inherently volatile nature of cryptocurrency markets, the existence of a correlation between GME/AMC stocks is often difficult to prove convincingly. Johnny Liu, CEO of KuCoin – a cryptocurrency exchange – told Cointelegraph:
“The only parallels between these assets for traders who know how to profit from high-risk trades, which involve bitcoin, were reportedly no real possibility under regulation and pressure from influencers and assets. Bitcoin and stocks The price fluctuations of both memes are very familiar to the old-timers of the crypto market – pump-and-dump in action.”
AMC’s stock rose 95.22% to $62.55 on June 2. Following the announcement of the sale of 11.55 million shares, the share price fell by 17.92%. This, combined with the fluctuations observed in GameStop in the first year, is proof that any scenario is possible with these stocks because of the missing fundamentals and information spread on reddit.
However, CNBC host Jim Cramer mad Money, has indicated that this might be the right time to get into GameStop and AMC, although they cautioned that “if you’ve raised them from very low levels, take a little off the table. These stories can always be bleak.” .
Du Kwon, co-founder of Terra – a protocol for fiat currency – elaborated on the relationship between Reddit and these shares, telling Cointelegraph, “Both [GME and AMC] Shows retail trader’s frustration with current HFT [high-frequency trading] The functionaries and oddities of the tradefy world. He added, “It wouldn’t be surprising to see this continue to happen with other properties in the future, especially as social media and the way people organize and interact online evolve.”
Speaking of stocks with well-established correlations with bitcoin, Microstrategy (MSTR) is the first stock that comes to mind due to its large reserves of bitcoin as well as the high bullish stance of its CEO and founder, Michael Sayer. The company holds 92,079 BTC worth over $3.4 billion, which is 0.43% of the token’s maximum supply of 21 million tokens.
The firm was one of the first publicly traded companies. Add bitcoin to your balance sheet And it was also considered a proxy of BTC by investors in traditional financial markets. Liu continued, “The companies that own bitcoin depend on its value. MicroStrategy fell by 10% during the week; bitcoin lost the same amount. When you have 90,000 BTC it doesn’t matter.” No.”
In fact, Microstrategy is included in JPMorgan’s Cryptocurrency Exposure Basket (CEB), a debt instrument portfolio consisting of 11 unevenly distributed stocks. These stocks are either issued by companies that hold BTC on their books as a Treasury asset or are related to cryptocurrencies in a subsidiary way.
In addition to Microstrategy, which accounts for 20% of the total allocation, CEB also owns stocks of companies such as Square, PayPal, Nvidia Corporation, Riot Blockchain, Advanced Micro Devices, Taiwan Semiconductor Manufacturing Co., Ltd., Intercontinental Exchange, CME Group, Overstock.com and . Silvergate Capital Corporation. Gaspar further spoke on the performance of CEB in comparison to BTC:
“JP Morgan’s cryptocurrency exposure basket has outperformed BTC given that the basket includes companies that are not pure-play cryptocurrency companies. This protects investors from the volatility of BTC. Nvidia , one of the companies in this basket, is currently at an all-time high, while BTC is down around 45%.”
Meme stock phenomenon phenomenon
As to the impact of the meme stock event on the major cryptocurrency in BTC, it is unclear as some of the movements seem to be coincidental. However, this could be a precursor to another meme coin rally similar to the performance of Dogecoin (Doge) and Shiba Inu (SHIB) said Gaspar earlier this May, “There is speculation among traders that meme coins may be positioned to rally once they gain a foothold in the crypto market.”
Importantly, the communities that have driven meme stocks to such levels are also behind Gamestop and AMC’s stock boom. According to Kwon, “Interestingly, the core elements of GameStop, AMC and DOGE are subpar within their relative markets, but they represent a new type of social scaling point that can help investors’ frustration with existing limitations in the current system.” expression of it.”
However, a meme coin backed by a motivated and decentralized community of online supporters becomes a meme after a certain point, As seen in the case of Dogecoin.
It is highly likely that once these meme stocks become saturated with demand, some part of this demand has a high probability of flowing into altcoins, in particular, meme coins. Especially through trading platforms like Robinhood, retail traders crowd the site to make quick money and laugh with their friends while doing so.