Hey all — it’s been an eventful week for stocks. Meme stocks from AMC Entertainment (NYSE:AMC) to Support.com (NASDAQ:SPRT) have gained ground while SPACs strike out; Lucid (NASDAQ:LCID) recently hit its lowest point since May.
Call it the stock market’s version of the “sequel effect.” January’s meme stock runup was so enjoyable that investors can’t help but try short squeezes again. This week, the 15 most shorted stocks have risen 31%, wildly outperforming the S&P 500’s 0.76% gain over the same time. SPACs are just collateral damage of attention-deficit investors.
Of course, like every other trend before, this won’t last forever. I once wrote that AMC was unlikely to breach $75, even with a meme army behind it. Now that it’s less leveraged than before, that figure is closer to $65 (remember, lower financial leverage decreases the potential for gains).
Still, those looking for a touch of excitement have plenty of options. Blink Charging (NASDAQ:BLNK), Beam Global (NASDAQ:BEEM) and Arcimoto (NASDAQ:FUV) are all highly-shorted startups that could become the next meme stock.
Other News Tidbits
Internet Computer (CCC:ICP-USD). This blockchain protocol’s first-ever NFT, ICPunks, drops today. “Did not know I needed a Juggalo NFT to feel complete until this moment,” one Twitter user noted. It’s hard to disagree.
MMAT. Meta Materials (NASDAQ:MMAT) jumped almost 20% on Monday after a StockTwits short squeeze sent shares higher. Insider selling however, suggests a $5.50 sale price.
The Next Cardano Is Already Here
It has been a phenomenal summer for Cardano (CCC:ADA-USD), one of my top crypto picks. This understated cryptocurrency has risen 700% since I first gave it my “5-star” rating back in January.
As usual, mainstream investors were late to the game. No sooner did Cardano hit #3 on the charts than did the crowd take notice: Internet search volume for Cardano overtook both Ethereum (CCC:ETH-USD) and Dogecoin (CCC:DOGE-USD) by late August.
In order to notch another 700% rise however, Cardano would have to reach a $1 trillion market cap, a feat that only Bitcoin has achieved. And Moonshot readers will know by now that, much like an oversized housepet, it’s hard for something big to grow infinitely bigger. To repeat these 700% gains, it helps to look at altcoins coming from a smaller base.
Solana (CCC:SOL-USD). Back in May, I highlighted both Solana and Cardano as “Ethereum Killers” and noted their “strong potential for gains ahead.” Fast forward three months, and Solana seems to have gone quiet, at least from a market perspective.
But don’t be fooled — Solana has done even better than Cardano. This cryptocurrency is up has almost doubled Cardano’s gains in the past month, and now sits at #8 by market capitalization.
In short, Solana has garnered more interest from Silicon Valley than from Wall Street. In June, venture capital firm Andreessen Horowitz led a $314 million funding round for the cryptocurrency. The following month, they added another $9 million to Solana digital wallet company Phantom. So though the Solana Foundation has its work cut out for it, it’s only a matter of time before the finance folks realize what the tech gurus have been doing.
Internet Computer (ICP). “ICP remains one of my favorite dark-horse candidates for the next Bitcoin crown,” I wrote in July. Today ICP is up 63%, tripling Bitcoin’s 21% rise.
In part, that’s because investors are starting to recognize the quality of ICP’s protocol. The firm is tackling the thorny issue of how to keep highly-used blockchains from growing exponentially too large, and some of the best-known Silicon Valley funds are backing the project.
It’s also because ICP is starting to understand the importance of marketing and buzz in the crypto markets. Since I first wrote about ICP, the DFINITY Foundation has awarded $1 million in grants and planned an NFT release with American hip-hop group Insane Clown Posse. Though the foundation hasn’t gotten the marketing formula quite right just yet, it’s only a question of when, not if, this well-funded project will lift off.
Terra (CCC:LUNA-USD). Ever notice that very few people use cryptocurrency to settle everyday transactions? Firms from Coinbase to PayPal have struggled to tame Bitcoin’s high transaction costs and slow speeds to the point it can be used to buy a cup of coffee.
Meanwhile, Terra has rocketed ahead. The cryptocurrency, backed by South Korean firm Terraform Labs, acts as a bridge between stablecoins, “synthetics” and other cryptocurrencies — much like a fiat currency would.
And that’s the point: Terra wants to replace the cash in your wallet. The Terra ecosystem offers a stablecoin that provides instant settlements at low costs. And its “synthetics” means investors could potentially buy stocks and other assets without converting to cash (I can feel the IRS wringing their hands in anxiety already).
And the best part? Currently sporting a $13 billion market cap, Terra’s size looks much like Cardano’s before the latter rocketed to the moon.
SafeMoon Wallets and Gaming Tokens
When SafeMoon (CCC:SAFEMOON-USD) released its wallet over the past weekend, it was supposed to be a coup for the once-most popular cryptocurrency on Twitter.
Instead, the event was a flop. The wallet encountered serious technical issues within the first 30 minutes of launch, instantly sending SafeMoon’s price spiraling 20%. The Binance token is now down almost 90% since I first warned investors about the token’s hidden dangers.
Gaming-related tokens have also been sinking. My Defi Legends (CCC:DLEGENDS-USD) and Alpha Kombat (CCC:ALKOM-USD) have followed Zoo – Crypto World (CCC:ZOO-USD) into negative territory. Each is down by three-quarters or more.
In a sense, these sinking cryptocurrencies have one common theme — a desire to be the next hot meme. In SafeMoon’s case, the longing to one-up Dogecoin created an alternative reality on Twitter where well-produced marketing videos became more important than code quality. As for second-tier gaming tokens, these looked to replicate the success of Axie Infinity (CCC:AXS-USD) and Decentraland (CCC:MANA-USD).
Regardless, these assets continue to prove the point: when all crypto boats are raised by higher tides of hype and popularity, only those with underlying quality will stay afloat.
Who Wants to Win the Gaming Token Lottery?
|1,500%||Returns on Axie Infinity, a cryptocurrency gaming token, since last November.|
|154||The number of crypto gaming tokens tracked by CoinMarketCap, a cryptocurrency aggregator site.|
|6||The number of gaming tokens that have doubled (or more!) in value over the past week.|
|79||The number of gaming tokens with no discernable market capitalization.|
Joanna Makris sits down with TeraWatt Infrastructure CEO Neha Palmer to discuss the future of electric vehicle stocks.
And finally, Luke Lango talks about flying cars — yes, the ones you saw in the Jetsons. If things go to plan, we could start seeing production models as early as 2024.
For Collectible NFTs, I’d Rather Be Lucky Than Smart
In 2017, an Ethereum-based project caught my eye. After an hour of trying to get MetaMask to work, I was finally the proud owner of a $200 Cryptokitty — one of the first NFT projects ever developed for the Etherum blockchain.
I would end up selling it for $350 right before Ethereum came crashing down in the 2018 wipeout. And boy did I feel lucky. Fast forward three years and Cryptokitties are all but forgotten.
Today, Cryptopunks have taken center stage. One such piece — Cryptopunk #7243 — resold for $642,652.69 last week, netting the lucky owner a 10,000x gain.
In a sense, perhaps the outcome was foreseeable. Cryptokitties multiply indefinitely by design; there are now millions in existence. On the other hand, only 10,000 Cryptopunks were ever made. Supply-demand imbalance means each can be worth six figures.
But then again, who knows which limited-edition NFT will become the next Silver Dollar? With 15,828 different ERC-721 token contracts on the Ethereum blockchain (most of questionable artistic merit), even art scholars will find it hard to predict which project people will eventually love to love.
So, unless you’re buying for art appreciation’s sake, tread carefully. For everyone like me who profited off a Cryptokitty, there’s someone else on the other end who paid $350 for a JPEG now worth pennies.
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On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.