The phenomenon of meme stocks could be here to stay

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In cryptocurrency markets, the arrival of mainstream finance has cemented the sector as more than a fad. The same may soon be true of meme stocks WorldAhead

, lions and wildebeest featured in January 2021 in an imaginative description by Thomas Friedman, an American commentator, of the feeding frenzy over a handful of American stocks. Referring to GameStop, a consumer-electronics retailer at the centre of the frenzy, Mr Friedman said the stock would eventually go back to four to five dollars. “It’s the circle of life.”

Conventional analysis gives few explanations for such a sustained rise in a small handful of stocks such as GameStop—known as meme stocks, based on their sudden popularity on social media—whose ascent flies in the face of fundamentals or asset prices. Analysts have thus reasoned that what goes up must come down.This dovetails with the difficulty regulators have had in dealing with meme stocks. Research by Victoria Chiu and Moin A.

Predictably, conventional finance has tried to muscle in. An exchange-traded fund designed by Roundhill Investments, an advisory firm, based on an index of meme stocks, awaits regulatory approval. In cryptocurrency markets, the arrival of mainstream finance cemented the sector as more than a fad. The same may soon be true of meme stocks.

 

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