It seems that the conversations on community platforms and social media have given rise to a trading phenomenon that is fast gaining traction: meme stocks. When one looks at the definition of a meme, as it relates to social media and entertainment, it provides an indication of the trading phenomenon. Simply put, a meme is generally a visual that is circulated and shared so much on social media, that it eventually goes viral. Often, these visuals become the running motif for a particular feeling or narrative. A meme can even be as simple as a celebrity’s expression being captured, only for social media users to then repurpose it to suit their own situations.

Similarly, meme stocks are characterized by their virality because of conversations on social media or community platforms. This leads to a growing interest in that particular stock, not necessarily because of the company’s improved performance, but rather, because of the traction on various platforms.

Are meme stocks worth the hype or just a fad?

While reports have confirmed that meme stocks are indeed quite popular of late, some argue that they are not worth the hype. This is because the growing interest leads to the stocks being overvalued, without any real data or statistics to back it up, save for the online conversations that will inevitably die down. The rapid price spikes in meme stocks are not sustainable in the long-term, as they are essentially artificial and not reflective of the company’s true performance.

In such cases, the early adopters who bought the stocks relatively early and saw their value increase upon their virality are the ones who can expect to really benefit from the activity. Once more people start catching on and investing in such stocks, the profit-taking phase is set to kick in after a few days. This is generally when the early adopters start cashing out at the most opportune exit point, allowing them to really capitalize on the activity. However, late investors and those who hold on to the stock for longer than necessary generally lose out. Therefore, it can be said that meme stocks are becoming quite popular, and one must pre-empt the most opportune entry and exit points in order to truly make the most of them.

Meme stocks can have an influence on the American dollar.

As already highlighted, meme stocks do not truly reflect the actual performance of the company or the real demand for its stock, therefore, they can be misleading. Because of this, there has been much speculation and many questions on how it affects USD and CAD currency trading. Some of the stable and most traded currencies, such as the USD and JPY, are said to be the go-to-currencies for investors amid the rise of meme stocks, therefore, the same can be assumed for the CAD. Currently, BlackBerry and Cineplex are reportedly the top two Canadian meme stocks to consider.

Analysts have referenced past market turbulences and drawn parallels to them in the case of meme stocks, concluding that should the current trend die down, the prominent safe-haven currencies are expected to increase in value. However, for the time being, this is purely speculative as the future may not always mirror past market activity.


Related

Resources