How one investor applied lessons from the meme stock frenzy to blockchain and NFTs

Almost two years ago, during the first winter of the COVID pandemic, Roman Tirone was introduced to the world of meme shares.

“I think a couple of friends reached out to me and I took a look,” the New York-based investor told CNET. “There was a strong community that was pretty confident that it would drive the stock up.”

Those were heady days indeed for darling meme stock AMC Entertainment Holdings Inc. AMC,
+1.54%
as investors pushed the stock to a high of $72.62 on June 02, 2021. AMC closed at $18.21 on Wednesday, well below its 52-week high of $52.79 reached on September 13, 2021. Game Stop Corp. GME,
+1.94%
climbed to a 52-week high of $63.92 on Nov. 3, 2021, but ended Wednesday’s session at $37.93.

Caught up in the momentum of the meme stock community, Tirone made significant investments in AMC and Game Stop. “At first everything was great, then things started going downhill,” he told GameSpot.

Look now: AMC may have been a darling of meme stocks, but weakness in some key areas has put the company on shaky ground

However, he was able to apply what he learned elsewhere. “I ended up taking what I learned about digital communities, online investing and new speculative assets and applied it to blockchain and NFT investing,” he said.

An NFT, or non-fungible token, is a unique digital asset that utilizes blockchain technology to verify ownership or exchange tokens. An increasing number of companies are getting involved in NFTs. eBay Inc. eBay,
-5.47%,
for example, recently launched its first collection of NFTs, which feature animations of athletes from the cover of Sports Illustrated.

Blockchain, which has grown in popularity in recent years, is a decentralized digital ledger of transactions. The technology is used to support cryptocurrencies such as bitcoin.

“I learned a lot about how to read momentum, understanding how and when a community is a signal, both good and bad, and how there are generally levels to a community…whether it’s one that’s a lifelong investor or someone just coming through,” added Tirone. “You can’t get caught up in the inner glow of other people’s ideas when it comes to investing.”

After applying what he saw in the world of meme stocks, Tirone now describes himself as an NFT collector. Specifically, Tirone focuses on NFT collectibles, art, and Play-2-Earn games where players are rewarded with NFTs or cryptocurrency.

The market for NFTs, or non-fungible tokens, has boomed in recent years, but has cooled somewhat this year amid the crypto crash.

Look now: AMC ‘compressible’, GameStop shares hit multimonth highs

Nevertheless, Tirone says his transition into blockchain and NFT investing has been “life-changing.”

Despite choosing a new investment strategy, the investor maintains a small position in AMC. “I still have a little bit of AMC — it’s a tiny fraction of what I originally owned,” he told GameSpot. “It’s more of a symbol for the cause at this point.”

The reason, Tirone explained, has to do with the little guy. “At the highest level, it’s an underdog story where people who lose usually have a chance to win,” he said.

Bespoke Investment Group analyst George Pearkes told CNET that the massive bullish volatility in meme stocks is clearly playing out. However, he called the meme shares “stickier in the exits” with some investors unwilling to ditch the shares. “The inflows come really big and really fast, and then the outflows flow,” Pearkes said.

Look now: Here’s the little-known reason why Cathie Wood’s ARK Innovation ETF is having such a bad year

To illustrate his point, Pearkes pointed to the “rough journey” that the ARK Innovation ETF ARKK,
-0.84%
has run since the peak in 2021, noting that some investors are still committed to owning the ETF. “It’s pretty standard investor behavior, and I think it applies to meme stocks as well,” he said.

The ARK Innovation ETF is down 48.7% year-to-date. AMC stock is down 33% in 2022, and Game Stop is up 2.2%. The S&P 500 SPX Index,
-0.16%
has fallen 12.8% in the same period.

AMC will report second-quarter results after the market closes on Thursday.

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