GameStop, cryptos, SPAC, AMC… On Wall Street, one bubble drives out the other

AMC, cryptocurrencies, SPAC or even GameStop… In recent months, bubbles have been growing like weeds on Wall Street. As soon as a bubble shows signs of deflating, speculators storm another market segment, contributing to the emergence of a new bubble. And so on.

“Individual investors move from one bubble to another, it is a pattern that we have identified since last summer on the most speculative assets of the American market”, explains Giacomo Pierantoni, an analyst at Vanda Tracks , a firm specializing in monitoring the behavior of stock marketers.

Join a community

Good deals are exchanged on the WallStreetBets forum on Reddit, which has more than 10 million members, or via social networks such as Twitter, Facebook or TikTok. Traditional financial analysis, made up of Excel tables and growth assumptions, is at best an ulterior motive, most often non-existent.

The key word is “momentum”: high gains in a very short time that make punters salivate. They jostle each other to take part in the party and thus contribute to the soaring prices. What matters is the excitement of participating in a collective movement, of joining a community, an experience rather than a long-term investment.

GameStop: when internet traders storm Wall Street

One bubble chases the other

Last summer, individuals swore by Tesla and new electric vehicle manufacturers like NIO or BYD. Earlier this year, they threw themselves into GameStop and a slew of other titles like BlackBerry and Nokia.

“When these stocks collapsed, retail investors quickly turned their attention to the cannabis sector, which recorded triple-digit returns in a very short period,” says Giacomo Pierantoni.

The SPACs also had their heyday, before being overtaken by the surge in cryptocurrencies: bitcoin, ethereum or even dogecoin. “When cryptos fell, the volumes of call options on stocks rebounded,” said the analyst, referring to derivative products very popular with young stock marketers. In short, one bubble drives out the other.

Little impact on financial stability

Their next step? A return to cannabis values ​​is likely, he believes, as Amazon recently spoke out in favor of legalizing marijuana consumption at the federal level in the United States and a bill in this regard. meaning should be studied in Congress.

The good news is that these bubbles have so far deflated without jeopardizing financial stability. Neither the weak bout of PSPCs nor the crypto crash derailed financial markets.

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