You’ve probably heard your friends, family, or people on the internet talk about meme investing or investing in companies and coins that have no intrinsic value or a company on the edge of bankruptcy just to name a few ways. Meme stocks are companies whose shares suddenly rise up after online viral activity usually perpetuated by social media. Meme investing can introduce many individuals to the world of stocks or cryptocurrency without the intimidation of knowing how the blockchain functions or reading a 10-K.
The Rise of Meme Investing:
Meme investing has always been around, but only recently see a wide range of people start accepting it and use it themselves. This recent hype around meme investing goes back to June of 2020 where many creators on TikTok promoted dogecoin and stated that if every user on TikTok invests $100 it will skyrocket the price of dogecoin to $1.00 leaving everyone with $10,000. The second most recent encounter of meme investing was the short squeeze of GameStop. This happened due to hedge funds shorting the stock, “betting it will go down.” The users under the SubReddit of r/wallstreetbets realized they could increase the stock price by buying up all the shares of $GME and forcing the hedge funds to lose money.
Risks of Meme Investing:
As fun as it can be, it is important to not get carried away with the risks of meme investing. At the end of the day, you are not investing because of a world-changing business or currency. It is most likely that your investment is based on other people following what you did. Undoubtedly, the most difficult task in the world, predicting the actions of human beings. In addition, it is important to realize that even though the price of a certain commodity may go skyrocketing at the end of the hype, dozens of individuals are going to be left with severely overvalued shares.
Written by Tejpal Gill