Who caused meme coins and GameStop stocks to surge instantly?

Author: Wu Tianyi, DeThings

On May 13, according to Bloomberg, GameStop stock (GME) soared 110% before giving back some gains, with the stock being halted multiple times due to significant increases. On Monday, it broke through $30 per share, closing up 75%. Its stock price has been on an upward trend, rising about 60% over the past two weeks. Additionally, according to data from S3 Partners, short sellers lost $1 billion due to the sudden rise in GameStop's price.

The reason for this surge is the return of user Roaring Kitty (also known as Keith Gill) to the public eye. On Sunday, Keith Gill posted a photo on X, a meme of a gamer seemingly taking the game seriously. The post received over 81,000 likes and 9,000 comments. This 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" frenzy. In 2021, GameStop was a video game retailer struggling to survive as consumers rapidly shifted from discs to digital downloads. Major hedge funds and institutional investors on Wall Street were shorting the company, believing its stock price would continue to plummet.

Gill and those who agreed with his viewpoint changed the trajectory of this seemingly bankrupt company by purchasing thousands of shares of GameStop stock, even as nearly all recognized indicators told investors that the company was in serious trouble.

This led to what is known as a "short squeeze," where large investors who were shorting GameStop were forced to buy its rapidly rising stock to offset massive losses.

According to Wikipedia, the investment frenzy in 2021 also triggered a surge in Dogecoin, as users on Reddit forums r/CryptoCurrency and r/SatoshiStreetBets attempted to drive up the price of Dogecoin to make it the next Bitcoin, resulting in a 370% increase. From January to May 2021, Dogecoin's price rose over 12,000%, reaching a market cap of over $9 billion, partly due to endorsements from Elon Musk and other celebrities.

After 2021, GameStop began to venture into the crypto industry. In 2022, according to Decrypt, the game retailer GameStop announced that it would no longer focus on cryptocurrency after reporting a net loss of $94.7 million in the third quarter and laying off employees in its digital assets department. GameStop CEO Matt Furlong stated that the company had "actively minimized its exposure to cryptocurrency risks" over the past year and that it "currently holds no material balance of any tokens." He also noted, "While we still believe that digital assets have long-term potential in the gaming world, GameStop has not and will not risk significant shareholder capital in this area."

Additionally, according to documents submitted to the stock exchange on December 7, GameStop appeared to still be advancing its NFT and blockchain plans.

On August 1, 2023, Bloomberg reported that the game retailer GameStop announced it would stop supporting its crypto wallets due to "regulatory uncertainty." According to the company's website, GameStop will remove its iOS and browser plugin wallets from the market on November 1, which allowed users to manage their cryptocurrencies and NFTs.

On January 1, 2024, Decrypt reported that after a year and a half of launching its NFT marketplace, video game retailer GameStop decided to shut it down. Its website stated, "Due to ongoing regulatory uncertainty in the cryptocurrency space, GameStop has decided to close the NFT marketplace," adding that the marketplace would cease operations on February 2 of this year.

Before the recent surge in GameStop stock, its situation was similar to that in 2021, with various business segments appearing to be in distress, and once again, Roaring Kitty drove its stock price up.

Moreover, influenced by Roaring Kitty, data from Santiment showed that the meme token $KITTY, named after Roaring Kitty, surged over 55 times in 24 hours, currently valued at $7.2 million, with a trading volume exceeding $10 million in 24 hours. Cryptocurrencies using the GameStop name, logo, and stock ticker also rose over 1,400% that day. For example, a token called GameStop (GME) surged 343%, with a market cap of about $17 million. However, this token has no relation to GameStop the company.

As GameStop's stock rose, traders showed strong interest in meme tokens, with data from Santiment indicating a 145% surge in social interest for FLOKI. The social volumes of several meme coins, including Dogecoin (DOGE), Shiba Inu (SHIB), PEPE, dogwifhat (WIF), and BONK, increased by 22%, 46%, 82.7%, 51.7%, and 39.4%, respectively. The price of PEPE rose 17.1% in the past 24 hours, continuing to set a new historical high of $0.00001023.

According to Santiment's data, the trading volumes of these tokens also saw a significant increase of over 200%. Meanwhile, as meme hype continued to heat up, the politically themed meme token MAGA (Trump) associated with Donald Trump rose 22.8% that day. The meme coin category also increased by nearly 6% in the past 24 hours.

However, some analysts pointed out the disconnect between GameStop's stock and the company itself. The game retailer has reported losses almost every quarter over the past three years.

eToro market analyst Josh Gilbert stated, "I think this will definitely trigger some short-term movements in these assets, but it's hard to see any long-term trends," he noted.

Additionally, Gilbert pointed out that the scale of outstanding short positions in assets like GameStop is much smaller compared to 2021, which means the "scale of the rise" may also be smaller.

"The current environment is incomparable to 2021, when interest rates were at their lowest, governments worldwide were providing fiscal stimulus, and major economies had almost no inflation."

"Interest rates in the U.S. are at 5.5%, and a global cost-of-living crisis is occurring. In short, consumers are unlikely to be in the same position as in 2021, which has a huge impact on financial decisions," Gilbert added. "Most investors now know how speculative rebounds end and are more likely to take a more cautious approach."

Evgeny Gaevoy, founder and CEO of cryptocurrency market maker Wintermute stated that cryptocurrencies could actually be affected by the rise of GameStop.

"The return of Roaring Kitty is bearish for cryptocurrencies; it is actually diverting investors' attention," he said.