Meme Stocks vs Altcoins, Whats the difference?

Financial markets recently saw a perfect storm of events, including low brokerage rates, massive liquidity through record-low interest rates & stimulus checks, and large interest from retail traders due to everyone being stuck at home. While the cryptocurrency and stock markets saw a large infusion of capital, these conditions also created alternate asset classes you may have already heard of, like Meme Stocks & Altcoins. With these assets continuing to gain popularity in the market, it is important to understand the factors currently contributing to the rise.

The Rise of Meme Stocks & Altcoins

Meme stocks overtook the market in early 2021 with investors pouring money into firms gaining traction on Reddit and other internet forums to outperform hedge fund investors. Aside from the internet hype, these equities were appealing to investors for a variety of reasons. Firstly, their prices were low, which meant that participants had more funds to spend (and then some, thanks to stimulus checks). Investors recognized well-known firms like GameStop Corp and AMC Entertainment Holdings to rally around.

In many ways, the rise of altcoins is similar to that of meme stocks – both on a superficial and structural level. The word “altcoins” was created to denote a cryptocurrency with little to no value or a digital currency with no immediate, discernible function. The word is frequently used to characterize altcoins or cryptocurrencies that emerged following Bitcoin’s surge in popularity. For instance, Dogecoin, the 13th largest cryptocurrency by market cap, is the most successful altcoins. By comparison, there is a long list of coins that are essentially scams involving a pump and dump strategy fueled by their own creators. For instance, the Squid Game token, inspired by the popular South Korean Netflix series, lost most of its value (the token went from $2,856 to 1 cent in less than a week) after the developers made off with an estimated $3.38 million of investor funds.

They’re Both Cut From the Same Cloth

On a superficial level, meme stocks and altcoins are driven by a speculation frenzy, aided by memes & other online jokes that have led to an actual increase in prices. The rise of these speculative assets can be attributed to the current public distrust of established financial institutions and the movement led by traders to fight back against Wall Street. The social leverage driving up the price of these assets is clear, whether it is a group of traders on Reddit looking to take down a hedge fund betting against a struggling video game retailer or an investor looking to join a community through the ownership of a token. Despite sharing these similarities, meme stocks & altcoins tend to differ significantly fundamentally.

List of Altcoins

AscendEX’s innovative products remove all technical barriers to entry and allow users of all levels to participate and trade / invest altcoins directly on the platform with an intuitive user experience. We have many altcoins that can be staked on our platform today. Here is a short list of altcoins on our platform.

• Buy Tether (USDT)
• Buy Akash (AKT)
• Buy Cosmos (ATOM)
• Buy Sushiswap (SUSHI)
• Buy Polygon (MATIC)
• Buy Solana (SOL)
• Buy Tezos (XTZ)
• Buy Avalanche (AVAX)
• Buy Ecomi (OMI)
• Buy Fantom (FTM)
• Buy Aave 

The Fundamental Difference Between Meme-Stocks & Altcoins

Meme stocks & altcoins differ in a fundamental way. For instance, when the stock price of meme stock such as GameStop or AMC rises rapidly, there is little to no effect on the underlying value of the business (essentially selling video games or movie tickets). Even when companies can capitalize on rising stock prices by selling shares (as both GameStop & AMC have done in the past) to increase their cash balance, the actual decision-makers are the executives/board of directors. This leaves shareholders with little to no control over the strategy or future of the company.

On the other hand, altcoins display the opposite behavior. Essentially, as a altcoins grows in price, its actual fundamental value will also grow (at least in theory). With several thousand coins created each year, the challenge is to see them get adopted by the masses as a utility token/means of payment – or for any other real purpose. Thus, when more traders pile into a coin, the price rise can lead to a network effect, which builds the ecosystem over the long term. This improves both the project and its usability. There are other advantages to the rising price of a altcoins; Attracting Developers, Improvements in Security, and Reduction in Transaction Costs.

Attracting Developers

The Incentive models used by tokens can help developers overcome the “chicken and egg” problem. A robust, open-source project requires efficient contributions from a large pool of developers to keep it secure and up-to-date. But developers typically contribute unless a project has attained scale. Thus, when a altcoins starts rising in price and garners significant interest from traders, it can also lead to a massive influx of developer interest (in the hopes of securing higher compensation), thereby improving the project’s long-term prospects and increasing its fundamental value.

Improvements in Security

Cryptocurrencies secured by a proof-of-work (i.e., Bitcoin/Dogecoin) or proof-of-stake consensus (Ethereum) depend on the miners and users who stake their coins to maintain security. But these users are only going to dedicate resources (equipment, electricity, or tokens) to a coin that has meaningful value. So, when a altcoins starts to gain traction, it incentivizes users to mine/stake the coin, thereby improving the security of the project.

Reduction in Transaction Costs

In addition to increased customer adoption, rising prices also tend to have other benefits. For instance, due to its immense popularity, nearly $1.2 billion of Doge / USDT is transacted in 24 hours; thus, any transaction made during the timeframe will have little to no impact on the price. In addition to attracting new buyers, rising prices significantly improve the coin’s efficiency as a result of lower volatility.

Bottom Line

Frenzied trading across speculative assets has given rise to meme stocks and altcoins, each offering the potential to multiply returns over the long run. While the two asset classes share similarities, they also have important differences. Unlike with a meme stock, rising altcoins prices lead to a potential increase in the fundamental value. This often results in increased security, heightened interest from investors and developers, and lower transaction costs in the network due to scale. However, the same can’t be said about a meme stock, which sees little to no benefits from rising prices.