At the beginning of 2021 retail investors entered the limelight as GameStop Corp. (GME) rose from under $20 per share to $483 in under two weeks. After the general public observed this phenomenon of a dying brick-and-mortar industry spring to life through the sheer will of a mass of retail investors lead by a common understanding of market game theory, many young lower and middle-class adults decided to join in.

"many novice investors that bought into the hype served as exit

liquidity to early investors, those novice investors have likely

sold at a loss."

Shortly after the "GME pump" market participants observed other "meme stocks" pump, including Virgin Galactic Holdings, Inc. (SPCE) which rose from under $25 per share to over $60 per share in the span of a month. Later in 2021, during the months of May and June, AMC Entertainment Holdings, Inc. (AMC) rose from under $10 per share to over $70 per share. Tesla, Inc. (TSLA) cost under $600 per share in May and doubled in the span less than six months.

These "pumps" were all driven by media hype. Young rebellious investors took to social media to share their lucrative tales of battling the "evil hedge funds" that controlled the mainstream narrative, inspiring other novice investors to join the war. These investors believe the way to combat wealth inequality is by buying into popular, but obscure investment opportunities (i.e. the sale of physical video games in vacant shopping centers when digital copies are available on the internet or theaters during an epidemic). While the share prices of stocks like GameStop Corp. and AMC Entertainment Holdings, Inc. remain above what they were "pre-pump," many novice investors that bought into the hype served as exit liquidity to early investors, those novice investors have likely sold at a loss.

"There are many bad actors that, for their own pecuniary gain, will manipulate others into making poor decision."

The general public has also taken root in the cryptocurrency market. Many uneducated and misguided retail investors buy into cryptocurrencies that cost only pennies, or even fractions of a penny, believing it is possible for their asset to reach a value where the decimal point will move several places to the right. In early 2021, around the same time as the "GME pump," a popular twitter account by the name of Elon Musk tweeted, "Dogecoin is the people's crypto," sending the value of Dogecoin (DOGE) from 4 cents to 8 cents per unit; then in April Mr. Musk further tweeted about Dogecoin, sending the price from 5 cents per unit to over 70 cents per unit in May.

While Dogecoin remains relevant, there is a newer popular, hype-driven cryptocurrency called Shiba Inu Token. In May of 2021 Shiba Inu skyrocketed creating overnight millionaires out of early investors. However, the creators of Shiba Inu Token gifted to Vitalik Buterin, the creator of Ethereum (ETH), a significant portion of the Shiba Inu Token supply. Mr. Buterin proceeded to sell (or dump) the entire supply he was provided with, causing the price of Shiba Inu Token to crash by 90 percent. For four months the price of Shiba Inu traded between 10 to 20 percent of what it was valued at its May peak until October 2021, when it rose by 1220.13 percent.

Cryptocurrencies like Dogecoin and Shiba Inu Token do not provide any value or use-case that an investor can develop strong conviction for, instead investors in Dogecoin and Shiba Inu Token rely on "The Greater Fool Theory," which provides that the value of a market asset is determined by what it can later be sold for. In the case of Shiba Inu, a large investor likely purchased a large order of Shiba Inu Tokens a month or so ago, and has since multiplied their initial investment 12 times over. When the large early investor is satisfied with their profits they will sell, causing the price of Shiba Inu Token to decrease. Because the asset has no value other than media hype, it is difficult for holders to have conviction that a recovery will follow a significant dip, so that one large sale can shake investor confidence causing a crash.

"If you have lost an amount detrimental to your livelihood due to a
bad investment a bankruptcy attorney can help you get back on
your feet."

The cryptocurrency market is rife with several types of fraud. The most basic types of frauds are phishing attempts on a user's crypto wallet so that the fraudster can empty the victims wallet of crypto assets. A more sophisticated type of fraud in the crypto space is called a "rug pull." The value of a cryptocurrency is determined by the amount of assets supporting its value, sometimes creators code their token so that they can drain any assets supporting the token's value at will, defrauding those whom invested in the creator's token, this is known as a "hard rug pull." Alternatively, a "soft rug pull" occurs after a token realizes increased value when the creator sells off the assets they minted themselves either for free or for very cheaply when they first launched the token, causing the price to crash. The most sophisticated types of scams are when hackers analyze the code of an existing decentralized finance platform, find an error, and manipulates the banking practices; these are known as flash loan attacks and can occur even when a project has been audited by an agency reputable in the digital asset sector.

It's good to save wealth and invest capital, but beware of grifts and frauds. There are many bad actors that, for their own pecuniary gain, will manipulate others into making poor decision. If you have lost an amount detrimental to your livelihood due to a bad investment a bankruptcy attorney can help you get back on your feet.

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