Author: Wu Tianyi, DeThings
On May 13, Bloomberg reported that GameStop stock (GME) soared 110% before giving back gains, and the stock was suspended several times due to sharp increases. On Monday, it broke through $30 per share and closed up 75%. Its stock price has been on an upward trend, rising about 60% in the past two weeks. In addition, according to S3 Partner, short sellers lost $1 billion due to the sudden increase in GameStop's price.
The rise was due to the return of user Roaring Kitty, also known as Keith Gill, who posted a photo on X on Sunday of a gamer meme that seemed to take gaming seriously. The post received more than 81,000 likes and 9,000 comments. It was his first interaction with the social media platform in three years.
According to CNBC, in 2021, Roaring Kitty encouraged a large number of day traders to invest heavily in GameStop stock, sparking a "meme stock" craze. GameStop in 2021 is a video game retailer that is struggling to survive as consumers quickly switch from discs to digital downloads. Large Wall Street hedge funds and major investors are shorting the company, or shorting its stock, believing that its stock price will continue to fall sharply.
Gill and those who agreed with him changed the trajectory of a company that appeared headed for bankruptcy by buying thousands of shares of GameStop as nearly every recognized indicator told investors the company was in deep trouble.
That started what’s known as a “short squeeze,” when big investors who had bet against GameStop were forced to buy its fast-rising shares to offset their big losses.
According to Wikipedia, the investment frenzy in 2021 also triggered a surge in Dogecoin, which rose 370% after users of the Reddit forums r/CryptoCurrency and r/SatoshiStreetBets tried to increase the price of Dogecoin to make it the next Bitcoin. Between January and May 2021, the price of Dogecoin rose by more than 12,000%, reaching a market value of more than $90 billion, partly due to endorsements from Elon Musk and other celebrities.
After 2021, GameStop began to enter the crypto industry. In 2022, according to Decrypt, game retailer GameStop said it would no longer focus on cryptocurrencies after a net loss of $94.7 million in the third quarter and layoffs of employees in the digital asset department. GameStop CEO Matt Furlong said that in the past year, "the risk to cryptocurrencies has been actively minimized" and "no substantial balance of any tokens is currently held." He also said: "Although we still believe that digital assets have long-term potential in the gaming world, GameStop has not and will not risk investing a lot of shareholder capital in this area."
Additionally, GameStop appears to be still moving forward with its NFT and blockchain plans, according to documents it filed with the stock exchange on December 7.
In August 23, according to Bloomberg, game retailer GameStop said it would stop supporting its crypto wallets, citing "regulatory uncertainty." According to the company's website, GameStop will remove its iOS and browser plug-in wallets from the market on November 1, which allow users to manage their cryptocurrencies and NFTs.
On January 1, 2024, Decrypt reported that a year and a half after launching the NFT market, video game retailer GameStop decided to shut it down. Its website wrote: "Due to continued regulatory uncertainty in the cryptocurrency field, GameStop has decided to close the NFT market," adding that the market will cease operations on February 2 this year.
Before this surge in GameStop's stock, its situation was similar to that in 2021, when all businesses seemed to be in trouble. Similarly, Roaring Kitty once again drove its stock price up.
Moreover, affected by Roaring Kitty, data from Santiment showed that the MEME token $KITTY with the same name as Roaring Kitty soared more than 55 times in 24 hours, with a current market value of $7.2 million and a 24-hour trading volume of over $10 million. Cryptocurrencies using the GameStop name, logo and stock code also rose by more than 1,400% that day. For example, a token called GameStop (GME) also soared 343%, with a market value of approximately $17 million. However, the token has nothing to do with GameStop itself.
As GameStop stock rises, traders show strong interest in meme tokens, and data from Santiment shows that FLOKI's social interest surged 145%. Several meme coins such as dogecoin (DOGE), Shiba Inu (SHIB), PEPE, dogwifhat (WIF) and BONK have seen social volume increase by 22%, 46%, 82.7%, 51.7% and 39.4% respectively. PEPE price has risen 17.1% in the past 24 hours and continues to hit a record high of $0.00001023.
According to Santiment data, the trading volume of these tokens has also seen a significant increase of more than 200%. Meanwhile, as meme hype continues to heat up, MAGA (Trump), a political meme token associated with Donald Trump, has risen 22.8% on the day. The meme coin category has also risen by nearly 6% in the past 24 hours.
But some analysts have pointed out a disconnect between GameStop stock and GameStop Inc. The gaming retailer has lost money in nearly every quarter for the past three years.
"I think this will certainly spark some short-term moves in these assets, but it's hard to see any long-term moves," he said.
Additionally, Gilbert noted that outstanding short interest in assets like GameStop is much smaller than it was in 2021, meaning the “size of the upside” is likely to be smaller as well.
“The current environment is not comparable to 2021, when interest rates were at rock-bottom levels, governments were providing fiscal stimulus around the world, and there was virtually no inflation in major economies.”
“U.S. interest rates are at 5.5% and there is a global cost of living crisis underway. In short, consumers are unlikely to be in the same position as they were in 2021, which has a huge impact on financial decisions,” Gilbert added. “Most investors now understand how speculative rallies end and are more likely to take a more cautious approach.”
Evgeny Gaevoy, founder and CEO of cryptocurrency market maker Wintermute, said cryptocurrencies could actually be affected by the rise of GameStop.
"The return of Roaring Kitty is bearish for cryptocurrencies and is actually a diversion for investors," he said.
