Popular meme stocks are rallying again as cryptocurrencies stabilize after a volatile May. Analysts call it a “fear of missing out,” or FOMO, as traders rotate from one hot market to the next.
“We continue to see the rotation out of crypto and back into stocks favored by the Reddit crowd,” Lev Borodovsky, editor of the The Daily Shot newsletter, wrote in an email to CoinDesk. "I’ve noticed this connection a couple months ago."
With bitcoin under pressure lately, meme stocks are catching a bid. Stocks such as AMC Entertainment (NYSE: AMC), BlackBerry (NYSE: BB), GameStop (NYSE: GME) and even Wendy’s (NASDAQ: WEN) have rallied strongly over the past month.
“Meme stocks are rising beyond their reasonable valuations based solely on the retail enthusiasm of investors who are often in it more for the lulz than to make a buck,” wrote Mati Greenspan, founder of Quantum Economics, in a newsletter published Wednesday.
More than 63% of all new trades executed by U.K. traders between May 23 and June 2 involved financial derivatives linked to shares of AMC, according to David Jones, market strategist at Capital.com, a European trading and investing platform.
“The volatility is really off the charts and chances are, a little like the cryptocurrency rout in May, when the price turns, then a lot of fingers will get burnt,” Jones wrote in an email to CoinDesk.
Bitcoin is up about 25% year to date, versus an almost 1,000% increase in GME and AMC during the same period.
The cryptocurrency’s return is still ahead of the S&P 500’s 14% return year to date. Bitcoin is trailing the Thomson Reuters Core Commodity CRB Index’s return of 26% over the same period.
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