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Dead squirrels normally do not feature in financial history. But we do not live in “normal” times right now. Far from it.
A month ago, America’s online Maga crowd exploded in social media outrage after New York health officials euthanised a pet squirrel called Peanut suspected of carrying rabies.
Since Peanut was already famous on the internet, Elon Musk decried the death. “The government can barge into your home . . . take your pets and execute them,” he declared.
Then, as viral outrage spread, the price of a memecoin — or digital asset — named after the squirrel jumped from $0.1 to $2.27 in a few days, pushing its market capitalisation over $2bn.
That makes the so-called PNUT coin the fastest-growing memecoin on record, beating even Musk’s beloved Dogecoin. And PNUT is not alone: amid the election of Donald Trump, a host of other memecoins have also soared. These include MOO DENG (named after a pygmy hippopotamus), 888 (reflecting the Chinese symbol of good luck), POPCAT, dogwifhat and CHILLGUY (linked to a meme of a relaxed, cartoon dog that is viral on TikTok).
What will future financial historians make of this? One way to frame it is that Trump’s election has created an opening for digital assets to go more mainstream. This week, bitcoin’s price breached the $100,000 mark for the first time after Trump nominated Paul Atkins to run the US Securities and Exchange Commission. Atkins is known as a laissez faire crypto advocate, unlike current chair Gary Gensler.
A second explanation is that the rise of PNUT and its ilk indicates that our financial system is (still) so awash with liquidity that it is in the grip of “extraordinary popular delusions and the madness of crowds”, to cite the iconic 19th-century book by Charles Mackay.
After all, even crypto enthusiasts acknowledge that memecoins have scant practical use or fundamental value. Instead, their price reflects their ability to act like profitable “cults”, which “give people family . . . an identity, community and friendship”, says Murad Mahmudov, a crypto enthusiast with an outsized internet presence. Traditional investors might shudder.
However, there is a third — even more existential — way to interpret this tale: it shows how the information ecosystem is changing in finance, as in politics. Most notably, the explosive rise of social media has already shifted the workings of politics and democracy. We are now seeing how it can move asset prices too, both in digital assets and, on occasion, in other sectors.
One sign of this appeared three years ago when the share price of companies such as GameStop and AMC surged amid viral internet chatter. Another sign occurred this year when GameStop gyrated again and the meme-stock craze hit more mainstream companies such as Palantir.
This will probably intensify during the next American administration. After all, Trump’s team won the US election on a free-speech mandate that opposes “censorship” — ie curbs on information flows, however scurrilous or co-ordinated. And his victory has sparked such an outpouring of animal spirits in the markets that many investors are now haunted by Fomo.
Moreover, if Atkins is confirmed as the head of the SEC, he is likely to adopt a spirit of caveat emptor around market rumours, rather than impose additional investor protections. Never mind mounting evidence that some viral chatter is co-ordinated or driven by AI bots. Don’t expect anyone to restrain Musk, say, if he writes price-moving social media posts about DOGE, PNUT or Tesla.
So what can ordinary investors do — other than stick to utterly boring mainstream stocks? The only sensible response is to start perusing those information flows, rather than just ignoring them or scorning them as Gen Z antics.
Tracking this is not easy. However, big hedge funds are increasingly using digital analysis to measure online sentiment shifts. Entities such as Bloomberg are developing tools for social monitoring too.
In another striking sign of our changing times, entrepreneurs are also jumping in. Consider, by way of one example, a group called Narravance, founded by cyber analysts. The founders tell me that while they used to mainly track political digital misinformation from countries such as China, they now have a product called Chatterflow, which tells retail and institutional users when viral noise is rising around specific stocks.
They say this has already helped predict recent price swings for companies such as Bright Minds Biosciences and they now hope to move into digital assets. Other start-ups will undoubtedly emerge too.
The good news is that such innovations show that free market forces can sometimes help to tackle market failures. The bad news is that the potential for market manipulation remains huge.
Either way, they key point is that the internet is not just reshaping politics, but financial markets too — and both trends will intensify in the next four years. Investors and regulators should brace themselves; those squirrel memes are more than a joke.
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