One year since GameStop started it all, the craze for meme-shares has started to fade.
This past January, millions of retailers gathered together to lead eye-catching rallies at critically underpriced and nostalgic companies, such as GameStop, AMC Theaters, and BlackBerry. Intraday traders minted a new asset class called “meme stock” and regularly added new companies to the basket throughout the year. At one point, a small Danish biotech company surged more than 1,300% in a single day on interest from individual investors looking for the next short squeeze.
But observers say those massive gains are likely to subside as retailers look to new heights to repeat last year’s massive gains.
“Meme’s stock rally is going to go downhill,” said Dan Rago, co-founder and CEO of Tradier. “I expect active merchants to jump into cryptocurrency in 2022.”
Tradier is a technology and financial software company that operates a lot of active retail trading in the market. Last year, the brokerage as a service provider handled $46 billion in assets for 2 million traders worldwide.
Raghu said factors that contributed to the stock rallies, such as people working from home and volatile pandemic markets, are declining. Above all, retail traders are “exiting” from simple stock trading and moving to more complex assets, such as cryptocurrencies.
A report from Apex Fintech Solution published on Friday showed that meme shares were beginning to lose ground at the end of 2021, with several popular names slipping in major stock ratings. Meanwhile, Metaverse shares have grabbed the attention of younger investors, with companies such as Facebook’s parent company Meta, the Metaverse platform Roblox and Nike, climbing up the rankings, Apex said. Although still undetermined, the metaverse is a virtual world in which people interact as avatars and can play, interact and shop with cryptocurrencies.
Raju said cryptocurrency trading volumes remain relatively low among retail investors, with most active traders making fewer than three trades per month.
But this is about to change.
“The year 2022 will be the year of regulation,” Raju said. “Regulation is good for cryptocurrency because it legitimizes the asset class. Not many active traders have jumped into cryptocurrency, so with regulation coming in, active traders will get involved.”
Many prominent investors have moved away from cryptocurrencies as they await more regulatory clarity from US agencies. Even popular trading app Robinhood has avoided calls to add more cryptocurrencies to its platform, citing regulatory uncertainty.
So far, lawmakers and regulators, such as the US Securities and Exchange Commission and the Federal Reserve, have been reluctant to act. One exception in Congress was Cynthia Loomis, a Bitcoin evangelist and Republican senator from Wyoming who is said to be planning a bill that would be one of the first attempts to create a legal framework for cryptocurrencies. Regulators, for their part, have begun to explore their own rules of the space, mostly focused on protecting investors.
“Regulations will legitimize,” Raju said, and for retailers, it will shift to “creating crypto volume.”