Update - May 15, 2024
“Risk On” Is Good for Our Crypto Plays
The market’s animal spirits are picking up again.
Earlier this week, Keith Gil – also known as “Roaring Kitty” – tweeted from his account for the first time in two years.
Gil is known as the WallStreetBets poster who originally started the “meme stock” craze with GameStop back in January 2021. After a multi-thousand-percent move in the stock, a congressional inquiry and a Hollywood movie, Gil is back on the scene.
And the market took note. In fact, traders pushed the shares of GameStop up over 100% on May 13 in response to the tweets:
While it may seem like this euphoria is independent of the crypto market, I’d argue otherwise.
And it has major implications for our portfolio positions.
“Risk On”
The resurgence of meme stock mania, as shown by the recent spike in GameStop (GME) shares, reflects a growing hunger for speculation.
When retail investors flock to high-risk, high-reward assets like meme stocks, it often signals a “risk on” period in the markets. Traders are more willing to bet on volatile, speculative plays. This sentiment can spill over into the crypto market, which thrives on similar speculative behavior.
For instance, during the initial meme stock frenzy in early 2021, we saw a parallel surge in cryptocurrencies like Dogecoin (DOGE), which skyrocketed from fractions of a cent to over $0.70 within months.
This period of irrational exuberance not only elevates individual stocks and coins but also drives a broader interest and investment in speculative assets. As traders seek out the next big opportunity, this increased liquidity and enthusiasm can significantly benefit our crypto positions.
With the animal spirits stirring once more, the potential for another leg up in the crypto market looks more and more promising.
Crypto Market Mania
Before we get into it, I want to be clear on something: I would not recommend buying meme stocks or memecoins if you’re new to crypto.
Instead, I would use a “pick and shovel” approach to profit from this “mania phase.” This means instead of jumping directly into the frenzied rush for meme stocks and memecoins, you invest in the platforms and technologies that support these trends.
Think of it like selling shovels during a gold rush. You’re not digging for gold yourself… you’re supplying the tools that enable everyone else to dig.
The best way to profit from crypto “mania” is owning the platform that memecoins are built on top of: Solana (SOL). In fact, the top 15 trending memecoins today are all built on top of Solana…
Solana is the fastest and cheapest among all blockchain projects. I don’t see this trend reversing…
Solana’s processing speed and incredibly low transaction costs make it an ideal breeding ground for these viral projects.
The best way to think about Solana is that it’s the infrastructure underpinning the gold rush of memecoins. It provides the tools and services necessary for these coins to thrive. Just as miners during the gold rush needed picks and shovels, today’s memecoin creators need a reliable, scalable blockchain platform.
I already have a large Solana position. But if you’re looking to add to your crypto portfolio, it is a great “blue chip” option.
But the rest of our crypto portfolio should benefit as well.
Outlook: Bright
The overall sentiment in the cryptocurrency market has been influenced by macroeconomic factors, regulatory developments and technological advancements.
Recent volatility in Bitcoin and other major cryptocurrencies can be attributed to profit-taking, regulatory concerns, and broader market corrections. That includes the latest FOMC meeting, CPI report and corporate earnings.
While it may seem these events are independent of the crypto market, I’d argue that they are inextricably linked. When investors feel more comfortable taking on risk, it benefits all risk assets… especially crypto.
We’ve had a few bumps in the road over the past month. But the long-term outlook remains positive. Increasing institutional adoption and technological innovations are driving growth.
When you factor in the net unrealized profit/loss indicator is still well below our 75% “sell” threshold…
Google search volume for “crypto” is near cycle lows…
And social media sentiment among my 500,000 followers is still very bearish…
I see no signs that this cycle has peaked. If anything, there are signs that we are on the verge of the next leg up in this bull run.
While Bitcoin has experienced a notable decline over the past month, its long-term performance remains strong. Ethereum has shown stability and growth, supported by its robust ecosystem and upcoming upgrades. Solana, despite facing some challenges, continues to attract interest due to its high-speed blockchain technology.
The cryptocurrency market remains dynamic. Ongoing developments are shaping the trajectory of these digital assets.
And as institutional adoption continues, I expect prices to continue their trend upward.
