In Focus: Missed Out on Meme Stocks?
Did you miss out on GameStop's (GME) epic run in January? Did you also miss out on the runs made by Blackberry (BB), AMC (AMC), and Clover Health Investments (CLOV) recently? An even more important question is did you get caught holding the bag? Did you catch all of these stocks when the hype and the stock prices peaked and now you're holding a losing position?
If you've missed out or were left holding the bag it's because you're a bad surfer, but that can be fixed. In addition to telling you how to become a better wave rider I'm going to tell you where I'm putting my money for the next big run.
Patience Lad, Patience
When surfing, for maximum enjoyment, one paddles out into the ocean, waits patiently for a wave that they have the skill to surf, and then they ride that wave towards the shore. Surfers don't sit on the shore, and then swim towards the wave when they see a big one coming in hopes of riding it. The most important part to enjoying the surfing experience after getting in the water is waiting patiently.
The popularity of the meme stock has given rise to people riding into the wave as it approaches while also hoping to get a piece of the wave. Some have tried to hide under the label of "technical analysts," but it's not. Technicians, the good ones at least, have their entries and exits planned, they're not buying just because everyone else is.
If you're someone ready to wait patiently for the next big wave, then look no further than Bitcoin (BTC-USD). The cryptocurrency is down 42% from its $64,829 all time high in April, and is currently trading sideways, allowing smart investors to accumulate what they can before it goes on another big run.
The pullback in Bitcoin can be attributed to some negative news that came out over the past few weeks. Tesla for example, after initially announcing earlier in the year that it would accept Bitcoin as payment, the electric vehicle automaker changed course in May. The company suspended vehicle purchases using Bitcoin and cited environmental concerns for their reasoning. The impact of the announcement was severe, and not just to Bitcoin but the entire cryptocurrency market. CNBC estimates that Tesla's announcement wiped out over $300 billion in cryptocurrency value.
Then there was the former U.S. President Trump referring to Bitcoin as a scam in an interview. Not that the former president has shown any type of exquisite knowledge when it comes to cryptocurrencies or the markets, but his words did have a negative impact on the cryptocurrency.
Outside of negative news events, the rise of meme stocks has also played a major role in the slump of cryptocurrencies including Bitcoin. Since Elon Musk's appearance on Saturday Night Live that was supposed to send Dogecoin to $1 but didn't, Bitcoin and Dogecoin have been on an accelerated slide. Since that infamous Saturday night, AMC went on to register seven straight days of higher closes. Also GameStop found its most recent bottom on May 11, and made its run from $146.92 to $344.66.
Things may not be looking on the up and up for Bitcoin, but it's been here before. In January Bitcoin pulled back 27% down to $30,000 before making it's run up to $64,000. In 2020 the pandemic selloff took Bitcoin down about 50% from ~$10,500 to $5,000. Prior to the pandemic selloff, Bitcoin had another 50% drop. After trading up to ~$13,700 in June of 2019, Bitcoin found itself trading down to ~$7,100 in November of 2019.
Long story short, Bitcoin is in another pull back, and in the past it has rewarded its investors who bought in during the pull backs and waited patiently for the rise. But a rise in traditional stocks or cryptocurrencies typically needs a catalyst, and we believe Bitcoin has a few.
First, El Salvador became the first country in the world to adopt Bitcoin as legal tender. This is a move that I can see other economically unstable countries throughout the world adopting after monitoring El Salvador's adoption for some time.
Second, recently Miami mayor Francis Suarez has stated he wants to make Miami a crypto city. That's right, the city best known for beaches and Bentleys wants to let their residents pay their taxes and fees in Bitcoin, as well as allow government employees to receive a percentage of their salaries in cryptocurrency.
The bigger goal for Miami politicians is to make the city into a Silicon Valley of the south. How becoming a crypto city will play into being Silicon Valley Deep South is anyone's guess, but I don't think it will hurt. A city like Miami promoting Bitcoin transactions, a city where millions of people travel to every year to enjoy some of the world's best beaches, parties, and food, this could only help the price of Bitcoin.
While I've mainly kept the writing to Bitcoin, an Ethereum investment at these levels works as well. There are so many amazing things happening on the Ethereum blockchain. You've likely heard about the madness happening with NFTs (Non Fungible Tokens), but that's just a small piece of it. My prediction is that Ethereum will surpass Bitcoin by the end of the 2020s, but that's another post for another day.
For investors looking to ride a big wave, this is the time to grab your surfboard and swim out into the ocean. Don't let the calm waters or the sideways trading of Bitcoin fool you. There is a big wave coming, and to ensure that you get everything you can out of the wave, you've got to be in the water now. Failure to move and invest with patience will leave you missing out or holding the back when Bitcoin makes its next big run.