Why is this week different from most other weeks? In most weeks, I don’t add any new symbols to my meme stock list; in this week I’ve added two. One of them is BITO, the ProShares Bitcoin Strategy ETF. The second, DWAC, Digital World Acquisition Corp, burst onto the scene yesterday when the SPAC announced a deal with Trump Media. Both have already taken traders for wild rides.

The former, BITO meets the meme criterion by being an innovator in the cryptocurrency space. There has been no shortage of anticipation for a US-listed bitcoin-related ETF. While BITO is not exactly the type of ETF that investors seem to want most, one that directly holds bitcoin, it was still able to attract $1 billion in just a few days. That is a staggeringly successful launch for a product that is likely to underperform its benchmark. (We discussed this ETF at length earlier this week, with particular attention paid to the costs that are likely to accrue from continually rolling the futures contracts that the ETF is required to hold.)  

The ETF’s launch was almost certainly a key factor in the nearly 50% spike in the price of bitcoin over the past month, pushing the cryptocurrency to a new all-time high after BITO came to market. Under normal circumstances, we might have expected the price of bitcoin to dip shortly after BITO began trading on a “buy the rumor, sell the news” reaction. Instead, BITO was so successful that bitcoin continued to rally on high demand before finally seeing some modest profit-taking over the past few days. This meant that the price of bitcoin was not positively influenced by today’s listing of a second bitcoin futures ETF, the Valkyrie Bitcoin Strategy ETF (BTF). At the time I write this, the volume of BTF is similar to that of BITO, but the hype factor seems much lighter.

The other new meme stock, DWAC, caught much of the investing world by surprise. This was a SPAC that began trading on September 30^th with little fanfare. It spent the first few weeks of its existence around its $10 listing price, which is typical for an unheralded SPAC launch. That ended with a bang yesterday when DWAC announced an agreement to merge with Trump Media, a newly formed venture created by the former President. DWAC initially traded about 20-25% higher, which is also more or less typical with the type of boost that a SPAC receives after announcing a deal. The stock drifted higher throughout the morning – doubling by 11:00 EDT — before going parabolic in the afternoon to close over 400% higher on the day at $45.50.This morning, we saw DWAC nearly triple on the open, and touch a high of $175, before trading at levels roughly double yesterday’s. That’s about 9x Wednesday’s close!

It is important to remember what differentiates a meme from a normal stock. While there is no fixed definition of a meme stock, they tend to be characterized by well-known brands that inspire fervent enthusiasm among the stock’s boosters. Whatever you might think of the former President and his brand^[i], it is extraordinarily well-known and clearly has a large group of committed followers. Consider the enthusiasm that President Trump inspires among his faithful and compare that to GameStop (GME) and AMC Entertainment (AMC).Like it or not, that makes for an incredibly powerful meme. And as with most other meme stocks, fundamental valuations matter little. That is important for investors in a company that is in the planning stage and has no fundamentals yet. 

It would not be unreasonable to believe that controversy will surround DWAC as we learn more about Trump Media and its intentions. Controversy brings volatility, which we have already seen to great effect over the past two days alone.  While it might be difficult for investors to be dispassionate about BITO and the bitcoin that ultimately underlies it, DWAC brings passions to a different level. If you do choose to trade or invest in either of these shares, please try to leave your biases and passions aside. Trading without objectivity can be very expensive. 

[i] Let us be very clear – this article is assiduously attempting to avoid expressing a political viewpoint. Please don’t attribute one.