Retail investors were among the most enthusiastic speculators on meme stocks and cryptocurrencies. But will they survive the devastation of the past few days?
Stanley “Stan” Druckenmiller says retail investors are being exposed as bull market geniuses.Druckenmiller had the self awareness to take himself out the game until he had mentally recovered, but he’s worried that a generation of day-traders that embraced the speculation of equities and cryptocurrencies may have blown themselves up for good.
Local sharemarket forums, once flooded with colourful debates about the prospects of pumped up penny stocks have resorted to gallows humour as punters try to make light of the total devastation of their portfolios.“Worst day I’ve had since I started trading” said one. “Worst day you’ve had so far,” was the helpful response.
“New to this. Have some money in ETFs,” said one poster on Reddit. “Down 6.41 per cent across portfolio within two weeks Honestly should have stuck to gambling on horses.”Beaten-up sharemarket traders are, however, trying to take some comfort that the stocks they’re owned may have some actual tangible value.
The percentage fall isn’t as extreme as some over-hyped tech stocks including the enablers of the trading craze – Coinbase and Robinhood. But in absolute terms the evaporation of digital wealth is extraordinary.For the first time since January 2021, the market capitalisation of crypto fell below $US1 trillion, down from a November 2021 peak of almost $US3 trillion.
However, listed stocks with direct linkages to crypto are taking it in the neck. Among them was Jack Dorsey’s Block which is quoted on the ASX after it bought Afterpay. But if the trend continues the leverage, over-confidence and hubris of inexperienced investors that built up during a period of excess is set to be purged for another generation.
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