Whether you know what the current Dogecoin price is or not, you've likely heard about the meme token recently. Originally fueled by social media users, Dogecoin has become a trending topic of discussion. The interesting part is that the Shiba-Inu-themed token is not moving in the same direction as other major cryptos like Bitcoin and Ethereum dive. Whether or not Doge will come out of this cryptocurrency storm smelling like a rose is obviously yet to be seen. However, these events, overall, could have been the catalyst that restarted momentum in things like small-cap stocks. 

There's no doubt that ETFs like the Russell 2000 Small-Cap Index ETF (IWM) has lagged the broader markets recently. Volume in April for the market as a whole has also been lighter compared to previous months. Needless to say, the "stock pickers" of the market remain focused on finding volatile trades. I've talked about Reddit penny stocks in the past, which have grown in favor of the Robinhood crowd. Though penny stocks on Robinhood are limited to NASDAQ and NYSE-listed names, for the most part, I feel that it is this group of market participants helping to revive some life back into retail trades. Case in point: you can trade both stocks and crypto on the app. Today, most cryptocurrencies are down, which would be a perfect setup to rotate back into stocks. 

Are Penny Stocks The Best Way To Play The Boom In Cryptocurrency?

When it comes to cheap stocks, the underlying companies are usually in the development stages of business. This means they're still trying to figure out how to grow and monetize their business. Since many operate with very lean operations, it offers an interesting ability to pivot and try new things without facing too much opposition. For instance, most of the cryptocurrency stocks from months past made some sort of pivot or another to take advantage of this trend in digital assets.

Whether it was NFTs or mining, companies like Marathon Digital Holdings (MARA) and Canaan Inc. (CAN) have grown into mainstream names thanks to the crypto boom. Even look at Takung Art (TKAT) and Oriental Culture Holding (OCG) earlier this year. Neither has released any meaningful news. But the sheer speculation that they were exposed to non-fungible tokens made them into more "reputable companies" in some sense. Again, both TKAT and OCG were considered penny stocks before this boom in crypto. 

So in this sense, penny stocks appear to have been one of the best ways to play the crypto trend. Are they the only way? No, and those who aren't looking to gain such high-risk exposure could look at higher-priced stocks with exposure to either cryptocurrency, cloud computing, IoT, and even digital networking. Tesla (TSLA), for instance, gained some momentum after it announced that it would be accepting Bitcoin as a form payment for its cars. PayPal (PYPL) was another company that caught some traction after it reported that users could purchase things like Ethereum and Litecoin on its platform. When Square (SQ) announced that it had purchased a block of Bitcoin, traders & investors flocked to the stock. Of course, the Coinbase (COIN) IPO has also brought a bit more justification to crypto as a viable investment vehicle in 2021. 

Use Caution With Cryptocurrency Stocks

If you're coming into the stock market today because of all of this hype, slow down and take a step back. Most cryptocurrency stocks are extremely volatile. I'm not talking about companies like Tesla or PayPal but ones with a majority of their operations leveraged by the digital currency industry. Obviously, Coinbase could move and fluctuate with the price of its digital assets, your cryptocurrency mining stocks, and even blockchain technology companies could experience their own bout of heavy price fluctuation. 

So if you're looking to buy cryptocurrency stocks right now because you saw the Dogecoin price skyrocket, it may be best to reset some of your thinking. Unbridled exuberance can result in a vacuum effect. Look at some of the EV stocks from last year. You've got lesser-known companies like Electrameccanica Vehicles Corp (SOLO) rallying from just 10 cents last April to over $13 by November. Today SOLO is hovering around $4 and continues to decline. Plug Power (PLUG) skyrocketed from under $4 last year to over $75 by January.

Today it's trying to hold a level of support at $25. Shares of Ayro Inc. (AYRO) saw a lift from under 50 cents last year to over $11 earlier this year. Since reaching those highs, AYRO has declined to levels back below $5. The main point here is though all of these are still trading much higher than they were a year ago, the vast majority of the trading volumes and types of investors came in far later than when these were trading as penny stocks. 

Can they rebound? Anything can happen, and millions have poured into these green energy stocks over the last 12 months. However, those who didn't play this as a trade and bought shares at or near their tops are now in a tough situation based on how far these "trendy stocks" have fallen in such a short period of time. Similarly, when you've got red hot niche trends, it's always important to keep in mind why stocks are moving like they are. Is SOLO worth $13 a share? If so, why? Is PLUG, AYRO, etc., worth the price per share they were at earlier this year? If so, why? At some point, fundamentals will play a role. When the hype dies, what justifies the price? In most cases, it will be the companies' business progress and fundamentals that will dictate whether they're stocks to hold or if they're overvalued.