Meme stocks humbled hedge funds in 2021

The current pandemic brought new investors to the stock market. Besides a rising interest in crypto, and NFTs, meme stocks were popular in 2021.

The current coronavirus pandemic brought a new generation of investors to the stock market. Besides a growing interest in crypto, NFTs, and the metaverse, meme stocks appeared to be popular among new retail traders in 2021. It happened as social-media-boosted trading led to wild swings in the market.

Earlier this year, several companies, including AMC and GameStop, saw a surprising surge in value. It happened as Reddit WallStreetBets users and Wall Street short-sellers contradicted, forcing a short squeeze on the stock.

Meme stocks going up

A short squeeze pushes those who bet against the stock to buy to forestall more considerable losses, increasing the stock price.

This event left some of Wall Street institutions sitting on billions of dollars in losses, emphasizing the new power and importance of retail investors in the market.

The New York-based investment management company closed out of its GameStop short position at the end of January, finishing the month with $9bn in assets under management, compared to the $12.6bn it started the year with.

Interest in meme stocks continued to rise as traders shared their returns on social media and praised the stock.

Only in January, GameStop surged 1,900%. However, a group of trading platforms, such as Robinhood, stopped its users from investing for a short period after volatility.

Overall, GameStop appears to be up more than 700%, despite a decline of about 70% in its 2021 highs. According to the latest figures, the daily average trading volume in November was down more than 76% before the meme stock madness took off.

In the meantime, AMC soared 1,200% since the beginning of 2021, hitting an all-time high at the beginning of June. Earlier in June, AMC warned investors not to buy their stock that affected the price downfall by 30%.