When 2021 began, shares of GameStop (GME) were trading at $19 and Bitcoin (BTC) was priced at approximately $30,000. Within a few short weeks, both assets hit all-time highs: GameStop topped $347 on January 27, while Bitcoin hit over $63,000 on April 15.
Naturally, the extraordinary performance of both assets invited comparisons. The rise of GameStop was driven by retail investors looking to make a quick buck and stick it to the man; the same could be said of many Bitcoin enthusiasts.
“The flash mob that drove up the price of GameStop,” said the Wall Street Journal that month, “is commonplace” in cryptocurrency. “Bitcoin could be the new GameStop,” wrote a CNBC columnist in February. Indeed, the same could be said of GameStop, considering that Bitcoin’s cult-like following started growing in 2010, over a decade before GameStop attained its unlikely meme status.
And yet, the two assets have diverged the last few months. Today, just over halfway through the year, GameStop is trading at about $220 per share — up over 1,000% since January 1st — while Bitcoin is hovering around $33,000, close to its Jan. 1 price.
The question is then, why has GameStop continued to soar while Bitcoin has come back down to earth, especially if the driving forces behind each asset’s gain are rooted in those assets’ shared characteristics?
The answer, it seems, is rooted in the differences between them.
For one, there is the wide discrepancy in market capitalization. Bitcoin’s market cap at the beginning of the year was a whopping $546 billion. In order for Bitcoin’s market cap to hit its $1.18 trillion peak in April, it needed to receive nearly half a trillion dollars in net inflows. GameStop’s market cap, by comparison, hit a high of approximately $24 billion in January — an impressive jump from $2 billion to star the year, but one which required far less capital.
Two, GameStop is a company and Bitcoin is a speculative digital asset. Investors can point to GameStop’s business over the last few months and give reason for their bullishness. “GameStop has made a number of operational changes that it appears the market has viewed favorably,” said Daniel Davis, a partner at law firm Katten Financial Markets & Funds.
Further, the video game retailer’s revenue surpassed Wall Street expectations last quarter, and it hired former Amazon executive Matt Furlong as its new CEO. There are material reasons why GameStop stock might be more attractive (setting aside concerns of it being overvalued). Bitcoin, by comparison, isn’t promising any innovations or future cash flows; the product is what it is.
Three, the fabric of the economy is restitching itself to resemble more of a pre-Covid world: demand for airlines is high, oil prices are rising, and white collar employees are going to work once again. GameStop, as a physical retailer focused on improving its digital offering, looks well positioned to capitalize on a new hybrid economy.
Bitcoin, by comparison, is struggling to stand out in this transitional economy. Even the rise of inflation, a supposed trigger for Bitcoin bulls, is failing to excite new investors. That, combined with China’s renewed crackdown on cryptocurrency and Elon Musk’s bearish turn on Bitcoin, makes for an inhospitable environment for new Bitcoin investors, especially institutions.
Of course, some market observers believe the “GameStop and Bitcoin are twins” narrative was overcooked to begin with. “If there is a correlation, it relates to the nature of the investors that buy Bitcoin and GameStop who are similar: younger, technologically savvy folks,” said Dan Ushman, Founder and CEO of TrendSpider, a leading technical analysis software firm for traders. “[But] I do not see that as being meaningful enough in terms of sheer volume to really move the price of either asset.”
In any case, it seems like GameStop is reclaiming its mantle as the investment of choice for risk hungry speculators.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
John Hyatt is a freelance journalist covering financial services, market structure, stocks and IPOs, and private equity. Prior to entering journalism, John worked in public relations for clients in financial services, investment management, fintech and cryptocurrency. John is currently receiving his M.A. in business and economic reporting from NYU as a Marjorie Deane fellow.