Oct 21, 2021 - Economy

Meme stonks lose their appeal to the world of crypto

 Data: Cardify; Chart: Axios Visuals
Data: Cardify; Chart: Axios Visuals

That sucking sound you hear is the outflow of meme-chasing dollars from the stock market.

Why it matters: The caravan has moved on. The dream of getting rich quick still lives, but today it's more often found in the world of crypto, NFTs or even sports betting than it is in the stock market.

By the numbers: Market research firm Cardify has a panel of roughly 500,000 users who let it see the monies flowing in and out of their bank account.

  • Out of those users, 30% have put money into places like Robinhood or Fidelity that facilitate stock market investing, while 4.6% have put money into crypto companies like Coinbase.
  • In January, those investors put $37 million into the stock market, while withdrawing just $19 million. In September, by contrast, investments totaled $16 million but withdrawals reached a record $26 million.
  • Crypto investments peaked at $10 million in May, when there were $3 million of withdrawals. As of the fall, the money continues to pour into the asset class, with $5 million of inflows against $2 million of outflows in September.
  • Caveat: Not everything is being counted perfectly. Robinhood, for instance, is tagged as a way of investing in traditional markets even though it also offers crypto. And Cash App isn't counted in either category, even though it offers investments in both.

The big picture: The "boredom markets hypothesis" holds that a lot of stock market activity at the beginning of this year was a function of small investors being stuck at home and not having anything better to do with their time (or their money).

  • Today, those investors are vaxxed and enjoying a much fuller social life; there are also many new suitors for their gambling dollars.

The bottom line: The money still entering the stock market is much more likely to be for long-term investment, compared to the fast money that flowed in at the beginning of this year and is now flowing straight back out.

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