New investor ‘force’ appeared on the US stock market: Sweeping everywhere from cryptocurrencies to stock meme

In January, amateur investors discussed on the Reddit forum to buy large numbers of stocks, including game retailer GameStop and movie theater conglomerate AMC Entertainment. After a lull, now that frenzy is back.

According to Refinitiv data, AMC stock is up more than 150% since Bitcoin started wobbling earlier this month and has more than doubled this week. Meanwhile, GameStop is also up 26% in the past week.

Analysts believe that the return of this “fuzzy chicken” group of investors may last longer than last year – when people had to stay at home to limit the spread of the disease. Meanwhile, some consider this to be a long-term trend and is having a noticeable impact on investment activities.

AMC shares sublimate while Bitcoin loses traction

While the markets have been mostly stable in recent weeks, rapid volatility has emerged in asset classes favored by young, tech-savvy, new investors. entered the stock and cryptocurrency markets last year.

After the rally in January, the frenzy has turned to the crypto market. However, the price of Bitcoin and Ether has been plunging since the beginning of May. As the attraction of this market wanes, it seems that the euphoria is moving towards the group of stocks that are of interest to retail investors.

A Goldman Sachs index that tracks the most talked about stocks in Reddit’s r/WallStreetBets group, has rallied 20% this week.

Some signs of excitement have emerged in the options market, where investors bet on the performance of stocks. The number of call options on AMC is up 40% since the beginning of the session on Tuesday to more than 1.8 million, according to Bloomberg. Retail investors’ net buying of AMC stock hit $209 million at the end of Thursday, up 273% from the previous week, according to Vanda.

Back then, day traders tended to focus on specific topics or sectors of stocks. However, this new group often tends to ” rotate into different asset bubbles ” in global markets, said Giacomo Pierantoni, an analyst at Vanda. ” They invest in highly dynamic assets, with great upside potential and supportive positive news, ” he said.

Pipetone from TradeZero added: ” These traders are not tied to any industry, they invest in that style .”

While retail investors make up a very small percentage of the market, with most of them young, they have the ability to accelerate outperformance with individual stocks or sectors.

” They don’t necessarily use a lot of money, but they use a lot of derivatives, ” Pierantoni said. Derivative transactions such as options and futures on stocks or cryptocurrencies allow investors to amplify potential returns and the ability to “manipulate” the price of an asset.

This style of investing is commonly seen among 18-40 year olds and is predicted by experts to continue.

Bob Cortright, CEO of brokerage technology company DriveWealth, said: “You see experts with the old style of investing saying this trend won’t last and it’s just a spike in stocks. trading. However, young investors have a different opinion.”

He added: ” This is a generation that grew up with video games. They are very knowledgeable and agile. That’s why crypto is so exciting for them, they love volatility .”

Meanwhile, others in the investment world disagree and predict that these “super speculative” traders will eventually turn into long-term profit-seekers, or simply expect prices to rise and fall.

Steve Sosnick, chief strategist at Interactive Brokers, said: ” This month’s drop in cryptocurrencies is the next sign that retail investors are bored .”

However, other experts say that the frenzy that followed the pandemic was the beginning of a new, important investment force. ” Everybody’s saying that this trend is going to end badly or that this is not the way to trade. And I don’t think that’s true, this group is creating new ways of thinking about the head, ” Cortright said . fourth .”

Consult the Financial Times