TL; DR
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The price of ‘things’ (like bananas) goes up, making our money less valuable. Safe assets that yield 5-10% per year cannot surpass this devaluation, so investors buy higher-risk assets (such as memecoins).
Full story
The price of bananas drives up the prices of memecoins.
Listen to us…
Inflation in the price of ‘stuff’ (e.g. groceries – including, but not limited to: bananas) remains persistent, meaning our money no longer goes as far.
This loss of monetary value encourages investors to move further up the risk curve, as safe assets yielding a nice 5-10% per year can no longer outpace the silent monetary devaluation we are experiencing.
So when a new stock or cryptocurrency hits the market, more people are likely to jump in, looking for a quick win.
Yesterday, that pattern of behavior played out in GameStop’s stock price.
(Again).
This time the catalyst was a Reddit post by Keith Gill (@TheRoaringKitty on X/Twitter, and @deepf***ingvalue on Reddit), who showed off his HUGE new position in $GME.
His trade? $200 million worth of options that allow him to buy $GME stock at $20 per share by June 21.
(For example, Keith is betting that GME will be worth more than $20 per share by the end of the month, and these options mean he can buy at a discount).
…cool, what does this have to do with crypto?
Well, this trade has gotten a lot of attention – so much so that $GME’s stock price has almost doubled in the span of an hour.
As traders search for similar opportunities, they ask the following question:
Question: “I missed the $GME pump, what’s the next opportunity?”
A: “Chances are it will be found in a memecoin.”
Is this a guarantee? No.
Is this a symptom of a healthy market? Also no.
But the mania of frothy financial markets often leads to huge price increases in high-risk asset classes.
And crypto is one of those asset classes.