Who are these ‘degen’ traders driving up meme stocks?

The recent GameStop rally fueled by Wall Street outsider Keith Gill aka Roaring Kitty has thrown light on amateur traders, who like to call themselves “degens,” short for “degenerates.”

Degens focus on high-stake bets on meme assets and are often driven by excitement, community, and the potential for quick profits.

What are meme assets?
They are tradable stocks, shares, NFTs, and cryptocurrencies, among other assets created for fun, often referring to an inside joke within online communities like Reddit. One such is the meme coin Dogwifhat, which has gained over 2,000% recently.

How did it all start?
A big moment when degens reaped huge profits was the GameStop revolution in 2021. Gill turned a $30 million profit during this time, inspiring many newbie investors.

The trend also gained momentum during the pandemic, with the rise of easy-to-use trading apps like Robinhood, points out the Wall Street Journal. Trading volumes have dropped since then, but die-hard degens have kept the movement alive.

Options trading, which gives the shareholder the right to buy or sell at a specific price for a certain period, hit record highs this year. Their average daily volumes were at 47 million, driven by long-shot bets. One GameStop option gave a return of over 2,000% recently.

But beware
While some degens achieve big wins, many lose money due to poorly timed trades. A recent example is the GameStop stock falling nearly 40% last week after it grew 167% the week before.

The SEC is trying to regulate trading apps to prevent the gamification of trading.