It's been an incredible day for high-risk assets, with speculators clearly stepping back into various meme stocks and cryptocurrencies alike in a big way today. For Bitcoin (BTC +1.63%), a 24-hour move of 2.5% may seem like small potatoes, given what's going on in the market today. GameStop (GME 0.58%) shares are up more than 70% this afternoon, with Reddit (RDDT +4.12%) seeing its stock price surge roughly 10% as well, on the return of Keith Kill ("Roaring Kitty") to social media. The meme mania we all thought was dead may have just taken a hiatus.
We'll see. The post that's driving speculators back to the market shows a man leaning forward in his chair, with many anticipating this could mean Roaring Kitty is considering adding a position (or already has). His previous timing of moves in GameStop, which aligned with speculative surges in other high-risk assets such as cryptocurrencies, could mean there are now the right catalysts present to create a surge of demand for these assets, driving prices higher in the near term.
Let's dive into what to make of this news and another key catalyst for Bitcoin many are now paying close attention to.
Meme mania is a big deal for speculators
Bitcoin's daily move has actually been quite orderly, and certainly much more muted than many have thought would have been the case, given this news. The thing is, Bitcoin's status as a store of value holding and a hedge for large money managers means these headlines don't mean much for those with the kind of capital to move this token's price.
Given Bitcoin's size and current market capitalization, it's also true that larger amounts of capital are required to flow into this token to see the kind of appreciation many expect to see in the world's largest cryptocurrency. Calls for $1 million Bitcoin are now proliferating, however, with Jack Dorsey among the top chief executives ringing the bell with this number. His recent announcement that Block (SQ +0.96%) will be deploying roughly 10% of the company's cash flow to acquire Bitcoin every month has provided another demand catalyst for Bitcoin that investors are clearly keying in on.
Now, the question is whether this increased demand for retail investors and speculators, in combination with already strong demand from corporations and institutional investors, could be enough to spur the next rally in Bitcoin to the six- or seven-figure range.
It's a supply and demand game
I certainly think that Bitcoin has moved past its speculation stage. Those who are betting on a surge to a price target of, say, $1 million are likely to take the view that it will be a long and arduous road to this level. Of course, historically speaking, that hasn't been the case. There are plenty of reasons to believe that if history proves to be our guide once again (in terms of post-halving moves), Bitcoin could be due for excellent near-term performance. But I think it's also becoming increasingly clear that seeing a market capitalization for any asset increase by trillions of dollars will require a very steep increase in demand.
Bitcoin's new supply has become increasingly limited, and there are certainly retail, corporate, and institutional investors that have reasons to continue adding Bitcoin during this point in the cycle. However, I think it will be important for investors to take a level-headed approach to adding to this token over time. Dollar-cost averaging into such assets over time, as Block executive Dorsey is reportedly expecting to do, may be the best course of action.
