- Dogecoin and shiba inu have made big gains alongside meme stocks Bed Bath & Beyond and AMC
- “It seems like there is still quite a bit of money that people are willing to risk, which is a good sign,” a cryptocurrency CEO told Blockworks.
The frenzy around meme stocks is back, echoing the more exciting highs of last year, and it’s spilling over into meme cryptocurrencies like dogecoin and shiba inu.
home retailer Bed bath and beyond (BBBY) is up as much as 360% in August, including a 67% rally on Tuesday, after Reddit users were inspired by GameStop president Ryan Cohen’s sizable stake in the company.
cinema chain AMC has also seen a resurgence, having jumped almost 47% month to date, as of Wednesday’s close. Retail investors last year saved the company from bankruptcy and frustrated its short sellers.
Retailer of games and stock of seminal memes gamestop (GME) has also found new retail interest, albeit relatively minor, with gains of 19% over the same period.
These moves represent a shift in risk assets from a relatively quiet July, when the macro environment was more tense. In recent months, markets remained spooked by tighter monetary policy to combat runaway inflation and warnings about the start of a recession.
The recent frenzy of meme stocks has coincided with a jump in their cryptocurrency counterparts. doecoin is up 16% this month, while the copycat Shiba Inu has gained 24%. For scale, bitcoin has only broken even; ether is up 9%.
Gains in these riskier corners of the market appear to stem from market events leveling off somewhat, with stocks rising from their mid-June lows, according to Jae Yang, CEO of crypto software firm Tacen. The benchmark S&P 500 and NASDAQ 100 indices rose about 4%, led slightly by the latter.
“It seems like there’s still quite a bit of money that people are willing to risk, which is a good sign,” Yang told Blockworks, adding that traders tend to wait for volatility to subside and catalysts to boost trading volumes.
Why meme coins are still relevant
In January 2021, GameStop’s infamous short squeeze drew attention to stocks that Wall Street institutions were seriously shorting. Then a group of Reddit traders banded together to pump similarly embattled stocks in a defiant display fueled by memes of retail power and stock market influence.
Meme coins, on the other hand, refer to cryptocurrencies whose brand name is derived 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 apparently relates more to the retail investor crowd, compared to the more technical octahedron of Ethereum, for example.
While 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 thousands, that really like the concept of meme coins, meme shares, and saying ‘I’m having fun and I want to have fun'” Portela said.
The phenomenon of investing in dog coins first struck a chord during the previous cryptocurrency bull run, when Tesla CEO Elon Musk began promoting dogecoin on social media.
Musk once described it as his “favorite cryptocurrency”, but it is often difficult to tell if Musk is serious (later referred to dogecoin as a “hustle” on Saturday Night Live, causing its price to plunge by as much as 35%).
Ethereum Merge Could Drive Momentum Alongside Meme Stocks
Rising meme asset prices have led dogecoin and shiba inu’s correlation to meme stocks to rise sharply over the past month.
Shiba Inu’s 40-day correlation with AMC, for example, is now 0.79 (with 1 exactly correlated), up from -0.12 a month ago, according to TradingView.
Dogecoin’s correlation with GME and BBBY has made almost analogous moves, but so have ether and bitcoin. In fact, ether’s correlation to AMC is now 0.82, well above the -0.34 recorded in mid-July.
“Meme coins are often the hardest hit by bear markets, as participants typically invest with the aim of capturing a speculative rally that could potentially generate huge profits,” said Manuel Ortiz-Olave, co-founder of tokenization platform Brickken.
Daniel Tal, project lead at crypto infrastructure startup ICHI, said that the meme coin market is entirely based on speculation, and that sentiment is currently fueled by the focus of Ethereum mergerwhich will cause the blockchain to switch from proof of work to proof of stake.
“While you see increased use of some coins like dogecoin in the last couple of months, I think that may have little to do with the price increase,” Tal said.
He reasoned that the recent Merger-fueled ETH price growth has brought with it shiba inu and dogecoin, “as retail users return to cryptocurrencies with the hype surrounding the event.”
David Canellis contributed to this report.
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