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Aug. 6, 2022, 4:50 p.m. EDT

How one investor applied the lessons of the meme stocks frenzy to blockchain and NFTs

By James Rogers

Almost two years ago, during the first winter of the COVID pandemic, Roman Tirone was introduced to the world of meme stocks.

“I think I had a couple of friends reach out about them to me and I took a look,” the New York City-based investor told MarketWatch. “There was a strong community that was pretty convinced that they were going to send the stocks up.”

These were indeed heady days for meme stock darling AMC Entertainment Holdings Inc. (NYS:AMC) as investors drove the stock to a high of $72.62 on June 2, 2021. AMC closed at $18.21 on Wednesday, well below its 52-week high of $52.79, which it reached on Sep. 13, 2021. Fellow meme stock star Game Stop Corp. (NYS:GME) climbed to a 52-week high of $63.92 on Nov. 3, 2021 but ended Wednesday’s session at $37.93.

Caught up in the momentum of the meme stocks community, Tirone made significant investments in AMC and Game Stop. “Initially it went really well and then things began to deteriorate,” he told MarketWatch.

See Now : AMC may have been a meme-stock darling, but weakness in some key areas has the company on shaky ground

However, he was able to apply what he learned elsewhere. “I ended up taking what I learned about digital communities, investing online and new speculative assets, and I applied that to investing in blockchain and NFT,” he said.

An NFT , or non-fungible token, is a unique digital asset that harnesses blockchain technology to verify ownership or trade tokens. A growing number of companies are getting involved in NFTs. eBay Inc. (NAS:EBAY) , for example, recently launched its first collection of NFTs, which features animations of athletes from Sports Illustrated covers.

Blockchain, which has grown in popularity in recent years, is a decentralized digital ledger of transactions. The technology is used to underpin cryptocurrencies such as bitcoin.

“I learned a lot about how to read the momentum, understand how and when a community is a signal, both good and bad, and how, typically, there are tiers within a community … whether it is someone who is a lifelong investor or someone just passing through,” Tirone added. “You can’t get swept up in the inner fervor of other people’s ideas when it comes to investing.”

After applying what he saw in the meme stocks world, Tirone now describes himself as an NFT collector. Specifically, Tirone is focused on NFT collectibles, art, and Play-2-Earn gaming, where players are rewarded with NFTs or cryptocurrency.

The market for NFTs, or non-fungible tokens, has boomed in recent years but has cooled somewhat this year amid the crypto crash .

See Now : ‘Squeezable’ AMC, GameStop stocks break out to multi-month highs

Nonetheless, Tirone says that his transition to blockchain and NFT investing has been “life changing.”

Despite his pivot to a new investment strategy, the investor maintains a small position in AMC. “I still have a little bit of AMC – it’s a small fraction of what I originally owned,” he told MarketWatch. “It’s more of a symbol for the cause at this point.”

The cause, Tirone explained, is all about the little guy. “At the high level, it’s an underdog story where people that typically lose have a chance to win,” he said.

George Pearkes, an analyst at Bespoke Investment Group, told MarketWatch that the massive upside volatility in meme stocks is clearly played out. However, he characterized meme stocks as “stickier in the outflow,” with some investors unwilling to relinquish the stock. “The inflows come in very big and very fast, then the outflows trickle out,” Pearkes said.

See Now : Here’s the little-known reason why Cathie Wood’s ARK Innovation ETF is having such a bad year

To illustrate his point Pearkes pointed to the “ rough run ” that the ARK Innovation ETF (PSE:ARKK) has been on since its peak in 2021, noting that some investors are still committed to holding the ETF. “That’s pretty classic investor behavior and I think it applies to the meme stocks too,” he said.

The ARK Innovation ETF is down 48.7% year-to-date. AMC shares have declined 33% in 2022 and Game Stop is up 2.2%. The S&P 500 index (S&P:SPX) is down 12.8% over the same period.

AMC reports its second-quarter results after market close on Thursday.

Link to MarketWatch's Slice.