A few years ago an eight-year-old Shiba Inu dog named Kabosu became an internet meme, her furry face juxtaposed with snippets of text in the parlance of stoner philosophy (“wow. much cake.”). The meme was known as “doge,” and it blew “lolcat” out of the water. Shortly thereafter, in 2013, a cryptocurrency called Dogecoin was launched, mostly as a joke. The coin ballooned then flatlined, hewing since then with the swings of the volatile bitcoin market—until July, when its stock value skyrocketed 104%. 

What was going on? The cryptocurrency wasn’t new, and it had never been taken very seriously, even by its own investors. How could a seemingly random stock suddenly more than double in value? “It was a TikTok trend,” said David Hanlin, an e-commerce adviser and day trader who got in on the Dogecoin bump. “In terms of the actual value of Dogecoin from anything other than a meme standpoint, it’s pretty low. But it doesn’t really matter what the underlying value of the stock or the cryptocurrency is. If there’s enough momentum behind it, you can still make money.”

Such is the approach of many day traders, or retail traders—people, often hobbyists, who trade stocks on popular platforms like Robinhood. Since the start of the pandemic, new users have flooded these platforms, propelled in some cases by a conviction that crisis breeds opportunity, and in others by newfound free time. Robinhood alone reported more than 3 million new funded accounts by May, half of which were started by first-time traders. And daily average revenue trades on Robinhood more than doubled in the second quarter compared to the preceding quarter. 

Many on Wall Street are baffled by the surge and have become more circumspect about how they read trends. “I’ve spent the last year, basically since March, trying to understand what’s happening, and honestly, I couldn’t tell you exactly. I’m very good at what I do, but there are times I’m just like, I have no fucking clue what’s happening,” said one equity trader for a Manhattan firm. “We were calling it banana land, the guys I work with, because it’s just, like, crazy. And then we started calling it ayahuasca land because it’s not even bananas anymore, it’s a whole other level of insanity.”

Much of the trading coalesces around a few online forums where schemes like Dogecoin can start to look like social-media-driven pump-and-dump drives. It’s not just Dogecoin—day traders chatting on forums like the wallstreetbets subreddit have made a number of decisions that have perplexed traditional traders and sometimes caused inexplicable market trends, including piling into Hertz or J.C. Penney stocks after the companies declared bankruptcy. “I suspect WallStreetBets members thought they could resuscitate [Hertz] through ‘Meme Magic’ and Robinhood, but its [sic] a zombie corp,” posted one Redditor who stayed away from the stock.

For many day traders, though, the idea isn’t necessarily to find a long-term investment but to identify momentum and ride the wave before jumping off at the right moment. A trader who got in on the Hertz stock after it declared bankruptcy told me he entered the market once the pandemic broke out because he saw an increase in volatility, and getting in on an up- or downswing is his bread and butter. “I was making a lot more money up until this month,” the trader, a small business owner in Oklahoma, told me. “There’s not as many wild swings with most stocks. You’ve still got Amazon, Tesla, and a few that are making big swings every day. But a lot of the stuff has stabilized, so it’s harder to make as much money.”

With Hertz, the trader said he noticed a pattern of the stock increasing by 20 cents or so before falling back down again, so he rode the cycle a few times before it evened out. But another trader, laid off from his day job in Georgia, told me he got in on the Hertz stock because that’s what people were talking about on the internet. “Social media, especially Reddit, is influencing a lot of the trades that are happening,” the trader, who uses Robinhood, told me. “For instance, as far as Hertz goes, they announced the bankruptcy and I immediately bought calls, and everybody on the internet was going crazy. And it just started going up because they just kept hyping it.” 

During the height of the Hertz boom, some platforms locked trading on the stock over concern that retail investors could be left holding the bag after getting in on trades they didn’t understand the implications of. The CEOs of Public, one trading platform, put out a statement about their decision to lock trading, citing what they saw as novice investors potentially being taken for a ride. “Counter to the stock’s recent surge in popularity in some trading platforms, analysts and experts deeply question the value of the stock,” they wrote. 

There’s risk involved for experts too. When certain stocks make upswings that have nothing to do with fundamentals, the Manhattan equity trader said, it can end up squeezing short positions as well, making certain reasonable positions career-enders. With the internet meme machine driving trading in certain stocks, some trends become more about following the collective frenzy and doing it in step with the crowd. “This job is all about managing risk. Like, that’s your number one job by far,” the trader said. “And you’ve got these 25-year-olds, mostly males, that are just, like, YOLO trading. And, you know, this is the shit that’s gonna happen.” 

It doesn’t always work out, though. The trader in Georgia lost money on some Hertz positions and told me he’s down a few hundred bucks over the last couple of months. Another Robinhood trader likely committed suicide because he didn’t understand what appeared to be a hefty negative balance in his account. “You’ve got the guys like the Wolf of Wall Street that only care about making money, and you’ve got the guys just trying to make an extra buck on the internet,” the trader in Georgia told me. “That’s ultimately where I think I lie, just a guy trying to make another dollar on the internet.”

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