Are MemeCoins the Return of the Wall Street Bets Phenomenon?

Translated by: Peyton

Nathaniel Popper has just published a new book, The Trolls of Wall Street, which explores the Wall Street Bets phenomenon. Interestingly, his book was published at a time when the current meme coin mania in the cryptocurrency field is strikingly similar to it. In this episode, Popper explores the rise of online investment communities such as Wall Street Bets and the broader social changes they reflect, especially among young men. He also touches on the similarities between the culture of banter in these communities and the rise of figures such as Donald Trump, and delves into the potential dangers and psychological effects of memes in modern investing.

Translator's Note: Wall Street Bets (WSB) is a sub-forum on Reddit that mainly discusses stocks, options trading and financial market strategies. The forum is known for its bold investment approach and challenge to traditional financial markets, attracting many retail investors to participate. WSB members often discuss high-risk, high-reward trades, such as buying high-volatility stocks and trading options. The WSB forum is often seen as an "anti-traditional" financial investment culture because most of its community members are retail investors rather than traditional institutional investors or professional traders. It has attracted widespread attention for driving abnormal fluctuations in some stock prices, especially the sharp fluctuations in GameStop (GME) stocks in early 2021.

From traditional financial fundamentals-based to concept-based investment

Laura Shin: You released a new book about Wall Street Bets this week, which is great timing, considering that Roaring Kitty (@TheRoaringKitty) recently returned to social media and we also saw the memecoin craze on Solana in full swing. I know the Wall Street Bets phenomenon took center stage in the public consciousness a few years ago, but it’s clear from your book that the same forces that created it are still in place.

Nathaniel Popper: Yes, and those forces are still in place today.

Laura Shin: Right. So, talk a little bit about what you think is driving this phenomenon and how it persists in our culture.

Nathaniel Popper: Well, you know, I was covering cryptocurrency before. My last book was Digital Gold, which tells the story of Bitcoin. In this book, I wanted to take a few steps back and look at the whole phenomenon of online money—this new world of cryptocurrencies, stock markets, options markets, and more. The cryptocurrency market has proliferated in all directions, and I was interested in the sociological aspects of that—this world of investing and trading that is made up primarily of young people. I wanted to understand the roots of these phenomena. My past research on cryptocurrencies was very useful in this regard, because I think the idea of ​​forming around memes and communities, and investing based on ideas and speculative potential rather than financial fundamentals, runs through the entire community. This investment style is very evident in young people investing in stocks and cryptocurrencies. I was very interested in how this world affects each other, with cryptocurrencies affecting the stock market, and the stock market affecting cryptocurrencies and options markets. People often look at these phenomena too narrowly, thinking of meme stocks, Bitcoin, and meme coins as separate entities. But I think this is a whole new world of online money that people are exploring, and people are creating new communities online.

Young Men and Cryptocurrency and Online Financial Communities

Laura Shin: One of the things that struck me at the beginning of your book was how you placed this activity in the context of the changing role of young men in American society. At first, I was taken aback and didn't understand how you came to that conclusion, but as I read deeper into the book and listened to the founders, it all made more sense. Can you talk a little bit about that argument? Do you think these same demographic changes have influenced the rise of cryptocurrency?

Nathaniel Popper:I'm glad you asked that question. I think it's a little-known point.Broadly speaking, young men in America are facing challenges. We're facing a loneliness epidemic in our society, and people are spending more time online. In particular, young men are skeptical of established authority and traditional sources of truth. This skepticism is particularly evident in the cryptocurrency space, where many feel alienated from mainstream culture and the world of finance. They are searching for a sense of purpose and identity.

Writing about Bitcoin, I saw that many of the early adopters were young males who felt disconnected from the wider world and were seeking meaning, power, and influence. This desire for identity and meaning often found its answer in cryptocurrency, and is sometimes even described in quasi-religious terms. Many who join these online communities do so because they feel something is missing in their real lives.

This online financial community is largely dominated by men. Traditional masculine ideas, which might be suppressed in the outside world, find space here to thrive.This is a progressive community where traditional masculine values ​​are freely expressed.This doesn’t fully explain all of the problems with cryptocurrency or the development of meme stocks, but it satisfies a basic urge within these young men.

Laura Shin: I totally get what you mean. At first, I thought your book was just a narrative about what happened to Wall Street Bets. But, in the preface, you talk about the impact that demographic changes are having on American men, which confused me at first. However, as I continued to read, especially in the forums where they discuss life, political beliefs, and opinions, it all started to make sense.

Nathaniel Popper:In recent years, it has been found that young men are falling behind their female peers in areas such as education and income. While men still hold many positions of power, this is changing among the younger generations. It is inevitable to connect this to the rise of young men in investing and cryptocurrencies. In this world of investing, young men are almost omnipresent.

The connection between these cultural changes and the world of finance is complex. While it is not the only explanation, it is hard not to see the connection when exploring the personal stories involved. Many people seek out this online world to fill a void in their real lives. For example, one of the main characters in my book is an alcoholic who finds a new world in these online communities.

Laura Shin:I don’t think you’re exaggerating. I was just surprised to see it tied into such a broad societal change. There’s definitely more to talk about as to why this is happening, and we’ll touch on other factors in a moment.

Robinhood’s Design and Controversy

Laura Shin:Nathaniel, in your book you describe the rise of Robinhood and how it has fueled this activity. Part of that stems from certain design choices that Robinhood made that may have led to more retail investors losing money. Can you describe those choices in detail and talk about how you think that may be affecting or has affected cryptocurrencies, especially given the popularity of cryptocurrencies on Robinhood right now?

Nathaniel Popper: Robinhood launched in late 2014, right in the middle of the 2013-2014 Bitcoin boom, when Bitcoin first broke through $1,000. Many of the people who talked about Robinhood on the Wall Street Bets forum had either made or lost money on cryptocurrencies or had seen friends get rich in 2013 and didn’t want to miss out on the next big thing. This sparked an unprecedented level of FOMO as people saw regular people getting rich from the Bitcoin boom.

At the time, Robinhood was a very simple app that was initially only available on the iPhone. It stripped away all the charts, data, and analysis that traditional brokerages offer, leaving just a price chart and a big green “Buy” button.The designers wanted it to be like Tinder or Uber, where you could buy stocks with just a swipe. This is a far cry from the way brokerages worked before, which involved multiple steps, warnings, and fine print that made trading seem inaccessible.

Robinhood's simplicity makes investing more approachable. When you buy a stock, there are confetti effects and ding-dong sounds, giving an extra dopamine hit.A lot of people have talked about Robinhood's elimination of trading fees, but the design choices are just as important. These changes made trading seem easy and approachable, quickly attracting a whole generation of new investors.

However, some have criticized Robinhood for making investing too simple. Traditionally, investing should be a rational decision that requires considering a company's financial situation, potential price fluctuations, and cash flow. Robinhood has set all of that aside and changed the philosophical approach to trading and investing. This new approach grew significantly starting in 2015 until COVID-19 hit, and it finally feels like it has taken over the market.

The Potential Dangers of Memes in Modern Investing

Laura Shin: I wanted to ask you again about your book’s role in memes in investing. In crypto, we’ve seen meme coins become some of the best performers, yet critics often deride them as silly or fraudulent. Through your research on Wall Street Bets and the meme stocks they invest in, what do you think the value of memes is? How do retail investors understand a meme stock or meme coin differently than more “serious” investors might overlook?

Nathaniel Popper: This is a very complex and interesting question. There are a lot of dangers, investment losses, and sad stories hidden in the investment trends driven by memes. Every stock and cryptocurrency has some level of meme factor. Investing has always involved an understanding of a company and the community it represents. Even if we don’t call it a “meme,” this psychological aspect of investing has always been there.

I think the introduction of memes in investing started in the world of cryptocurrency, highlighting how language connects us online.Social media is full of valuable communities, but traditionally, we haven’t been able to directly benefit from them. Memes change that by monetizing ideas of community and identity.

Memes touch on a fundamental factor that has always existed in investing: you invest in a company not just because of its balance sheet, but because of what it represents. Memes condense this idea into a purer form and turn it into an asset. However, the more you rely on memes rather than underlying financial substance, the more speculative and dangerous your investment becomes.

One important issue is that communities promoting meme coins often elevate the reputations of those who stand to gain the most, thereby ignoring those who lose money.This is particularly evident in actions like Elon Musk’s with Dogecoin, Bitcoin, and even his own stock. Social media amplifies the voices of those who are making money and obscures the losses experienced by everyone else. This imbalance creates significant dangers because we often ignore those who ultimately lose money in these speculative situations.

Trump’s Relationship with the Cryptocurrency Community

Laura Shin: You do have some similar stories in your book. I have to ask about Trump because a lot of what you talk about in your book is now in the news again. Trump embraced Bitcoin and cryptocurrencies during his campaign, in stark contrast to his previous presidency when he called Bitcoin a fraud on the dollar. Now, a portion of the crypto community is supporting Trump because he is starting to win over crypto voters. Can you draw some parallels between the Wall Street Bets crowd turning to Trump and the crypto community's current turn to Trump?

Nathaniel Popper: It seems to me that a large part of this new online investing world is essentially trolling. That's why the word "troll" is in the title of the book. I don't use the word in a completely derogatory way. It's about people who essentially see themselves as trolls. It's worth stopping to think about what trolling is: it's a universe where everything looks like a joke. When Trump announced his candidacy, it looked like a joke, and most people treated it that way. Yet beneath the surface of that joke, he touched a lot of deep things in the American electorate. He was willing to say things that no one else would dare to say, and people wanted to hear that.

This serious-yet-joking stance has been present in Bitcoin, Trump, and GameStop since the beginning. It’s easy to get lost in the surface comedy and miss what really moves people. This is true of Bitcoin, Trump, and GameStop. People always write them off as jokes, but they keep coming back because there’s something deeper behind them.

Even when these things are successful, they’re often ignored. Bitcoin was successful in 2013 and 2014, reaching $1,000, but when its price fell, people thought they could ignore it. The same was true of Trump after January 6, 2021, and the same is true of GameStop. People thought they could ignore these phenomena after the initial frenzy, but years later, they still have significance. There’s something deeper that resonates with people, and that’s the nature of trolls.

Whether Trump admits it or not, he has a lot in common with the mentality of the Wall Street Bets community. They see him as one of their own, someone who can take opponents by surprise while smiling. This way of having humor and serious intentions at the same time has deeply influenced our culture.

Laura Shin: Yes, your book is a great reflection of what is happening now.

Nathaniel Popper:Think about the guy holding the "Buy Bitcoin" sign behind Janet Yellen. It was just a joke, but nothing could have gotten more attention for Bitcoin than it. In the attention economy of the Internet, the bigger the joke, the more attention it gets, and the more real it is.

Laura Shin: That's why we see meme coins rising in value. It has to do with the way the internet works, people make money through advertising, and advertising relies on attention.

Nathaniel Popper: Someone made money through advertising before, but advertising doesn't necessarily make someone lose money. However, with a meme coin like Dogecoin, we don't see more losers.

Laura Shin: Yes, for sure. I've spoken to some people who bought Dogecoin at the top.

Nathaniel Popper: Even Elon Musk promoted it on Saturday Night Live until he admitted it was just a joke. Trolls are always willing to eventually admit they didn’t mean it.

Laura Shin: Yeah, but he probably made a lot of money from it. Anyway, Nathaniel, it’s been a great conversation. It’s very fitting that your book is coming out at this time, as these events are back in the headlines.

Nathaniel Popper: This history of the internet is very cyclical and cyclical. Bitcoin is a classic case where we see this cycle continue over and over again.

Laura Shin: Yeah, we’re in a bull cycle again, so we’ll see how these events play out this year. Thank you so much for joining us on “Unchained.”

Nathaniel Popper: Thank you for having me, Laura.