Market Analysis

US Dollar and Yen May Rise as Meme Stocks, Coins Warn of Market Excess

Bitcoin, Dogecoin, GameStop (GME), US Dollar, Japanese Yen – call points:

  • Signsspeculative mania in GME, DOGE, Bitcoin can predict a market downturn
  • What are the four phenomena that seem to drive the growth of peripheral, meme-related assets?
  • US dollar, Japanese yen may increase if the crossing of the market imposes a premium on risk shelters

Signs of market overruns began to emerge before the collapse of the financial markets in 1929, which helped trigger the Great Depression. An old industry word – one that has turned into money bubble stories – confirms, “If a shoemaker gives you tips, sell.”

This principle still applies todaycentury, although the profession and the communication environment are different. TikTokers and other social media influencers are the new digital canaries of the financial coal mine. Assets without a fixed core value have grownduring the pandemic, largely due to their encouragement.

These assets include, but certainly are not limited to, shares in GameStop, Bitcoin and its absurd successor Dogecoin. Their spectacular rise can undoubtedly be attributed to four phenomena [not in order of relevance]:

  1. Playing trading
  2. Growing interest in trade among the millennia
  3. “Issuance” of securities
  4. Highly loan terms

Playing # 1 shares

Trading applications such as Robinhood have helped to highlight the younger demographics of entrepreneurs. Although not in itself problematic, newer users are often less experienced. Together with user-optimized interfaces that facilitate trading, this has led to the general gaming of stocks and trading (ie the use of a video game-like approach for both platforms and services and trading itself).

# 2 Growing interest among the millennia involved in trading

Whereas in the past retail was associated with older and more risk-averse demographics, the new paradigm has begun to seem more like a game. The influx of younger traders, who have grown up in a more digital world with these new trading instruments, has begun to change the landscape and nature of trading as a whole.

# 3 Depositing Securities

The rush of younger traders has also brought social zeitgeist. Memes are the main feature of this phenomenon. When memes are linked to or take the form of an asset – Dogecoin is a prime example – its familiarity with a trading platform that introduces game-like investing has helped raise prices.

# 4 Super cool credit terms

In the wake of the pandemic, central banks around the world turned full credit taps to prevent credit crunches and the collapse of the global financial system. Although the liquidity tsunami was reacted with open hands as a credit stress, it has also allowed speculation. At the end of 2020, the technical direction Nasdaq was over 40 percent and S&P 500 about 15 percent.

However, these returns are pale compared to some of the above, as discussed above. In addition to those already mentioned, it also includes Tesla shares, whose iconic CEO Elon Musk has helped raise the shares to astronomical heights.

Below, we examine four rather strange assets that have received a lot of attention in the mainstream media since the initial start with the social / financial periphery.

Dogecoin: who fired the doges?

Dogecoin was created as a joke on December 6, 2013, using the famous Shiba Inu “Doge” meme as the character’s face. For years, it remained a financial pariah until honey culture began to spread more in ordinary speeches, and celebrities and influencers began to promote them. The growing popularity came with a new wave of younger, honey-friendly traders.

Between 1 January and 7 May this year, Dogecoin rose by a huge 13 263.9%. Tesla Musk boosted cryptocurrency growth after chirping “Doge” and “Dogecoin is the crypt of people”, sending more than 60% of the digital token in one day. The joke has led to a market cap of nearly $ 100 billion and wider adoption in retail.

Dogecoin – one year schedule

The price of dogecoin is rising aggressively

Image exported from Coindesk

Bitcoin: another bites your breasts?

Bitcoin rose an astonishing 117 percent from early 2021 to mid-April, to more than $ 64,000 per BTC. The rally reflects wider adoption, especially among those with a strong social media presence, such as Mr. Musk. It should be noted that he alone is not responsible for the Bitcoin rally, but he undoubtedly had an easily obvious role.

Bitcoin – schedule of the week

Elon Musk comments in part on higher bitcoin

Bitcoin chart created using TradingView

Ironically, the founder of Tesla is also the one who has been responsible for the recent volatility of BTC since its announcement. the company suspends the purchase of vehicles through Bitcoin. BTC /USD later crated, albeit a growing enthusiasm for it and an all-encompassing risk appetite are likely to keep it afloat in the near future.

GameStop: Stonks just goes up

Gamestop (GME) became famous after what was once called the shortest stock on the financial markets reversed and rose to over 2,200 percent in less than two weeks. The subreddit thread r / wallstreetbets was a social catalyst, with a redditor named “Roaring Kitty” later testifying to the amazing sharpness of the stock ahead of Congress.

Gamestop – monthly schedule

Gamestop is bouncing during retail speculation

The Gamestop chart is created using TradingView

The resulting short squeeze spread to wider stock markets and led to general cramps in benchmarks such as the S&P 500. If there were ever “traditional” signs of excessive or irrational market oversupply, GME’s remarkable rise and the popular phrase “stones only go up” would certainly look like they did (if not just financial archive type formed).

The US dollar, the Japanese yen, could rise as the meme frenzy erupts

The US dollar and the Japanese yen may be the preferred choice for volatility-shocked investors, who may at that time prioritize liquidity over yield. In the face of recent extreme turbulence – such as in 2008 and 2020 – JPY and USD have risen relative to the basket of G10 and EM FX colleagues.

Although past results do not indicate future results, history certainly seems to be rhyming. The yen and the dollar tend to rally even in the face of lower uncertainty and short-term volatility. There is likely to be more on the cards as the collapse of meme assets extends to wider financial markets.

US dollar, Japanese yen rose during 2008 global financial crisis, 2020 Covid outbreak

Source: Bloomberg

– Written by Dimitri Zabelin on DailyFX.com

Contact Dimitri must @ZabelinDimitri

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