This article was last updated on June 10, 2022
If you have paid any attention to financial news or general internet discourse over the past year, then you will surely have come across the word Stonks. This could have left you wondering what does “stonks” mean and why has it become so important to the financial world all of a sudden?
Today, we are going to take a deeper look into what stonks are, where the expression comes from, what makes it so popular, and what it means for you and your investments.
Table of contents
What Are Stonks?
Stonks is an intentional misspelling of the word stocks. It is an online meme that first popped up in 2017 and recently gained notoriety during the 2021 GameStop short squeeze. Now, if you are new to internet slang, a meme is essentially a humorous idea spread in the form of an image, text, video, or another medium. While memes are not new by any definition and have been around as an anthropological concept since the 1800s, they have gained mainstream popularity through the internet.
The word stonks is usually accompanied by an image of a caricature businessperson with a background of rising price charts. People use these to demonstrate poor financial decisions. Alternatively, it can convey activity on the market by people who have little or no understanding of how it works. Oftentimes, the meme denotes that such people have “failed upwards” and made profits through no merit of their own.
Why Are Stonks So Popular All Of A Sudden?
As we mentioned, stonks gained widespread notoriety during the 2021 GameStop short squeeze. Because it was mainly retail traders from the Reddit group WallStreetBets that took part in these events, internet slang was an integral part of the organization. Terms like “Stonks,” “Tendies,” and “To the moon” are how users communicate with each other. However, they also left old-school investors confounded and unable to grasp what was going on for quite some time.
Other significant events that boosted the term’s popularity also followed soon after this. Perhaps most significant of these was billionaire Elon Musk‘s activity on Twitter. The entrepreneur is known for his social media presence and did not miss this opportunity to get in on the social discourse.
Today, stonks is one of the most popular memes on the internet. This is especially true for communities within the financial sector. While it does see some use in the mainstream media, the term largely remains confined to internet spaces. This is mostly due to its less serious nature and association with unprofessional environments.
Suggested reading: What Are NFTs? Here is everything you need to know about NFTs
GameStop Short Squeeze And Other Important Events
In January of 2021, members of the r/WallStreetBets subreddit conducted a squeeze on short positions of GameStop stock. Thanks to financial analyst Keith Gill, the group noticed the overwhelming number of short positions placed against the company. As a result, a large number of retail investors began buying GameStop stocks at a low price. The goal of this is to make a profit when all of the short sellers have to buy the stock back at a later date.
As time passed, the effort gained widespread media attention worldwide. Aside from the mainstream media, many influential celebrities also shared their thoughts on the situation. One of these was billionaire Elon Musk, who voiced his support for the subreddit. When he tweeted a simple “Gamestonk!!” and linked to the message board, Gamestop prices soared by 157%. Internet slang terms were the main mode of communication on the message board, with stonks being chief among these.
Meanwhile, investors and financial experts voiced their concerns regarding the events, citing the many people who were opening positions with large leverage ratios. In their minds, these people would end up losing more money than they had. Others saw these events as a movement against the tightly-knit Wall Street elite. Since retail investors were taking on large hedge funds, it was often portrayed as a revolution.
As the movement grew, its effects began to spill over, and other stocks were quickly affected. Notable examples include AMC Entertainment Holdings and BlackBerry Limited. The price of the former jumped by 480%. Additionally, meme cryptocurrencies like Dogecoin experienced surges as a result of the increased interest in investing.
Interesting read: Forex Vs Stocks – Which Is More Profitable And Why?
The Impact Of Stonks
While stonks remain an internet meme, confined to social media and message boards, they are indicative of a much larger point. By looking at how the term penetrated the media landscape, we can see the effect that the internet can have on financial markets. Unconventional places where people gather, like online message boards, can now make or break markets. These new technologies have enabled retail investors to pool their resources and efforts, making them a significant force.
By gathering online, groups of individuals can grow to sizes sufficient enough to challenge some of the largest financial institutions. The best example of this is WallStreetBets, which successfully took on Melvin Capital and Citadel LLC. Both of these were regarded as two of the best hedge funds on the market.
Conclusion
While Stonks might be just an online joke, the term is also indicative of a major shift in global finance. Through the internet and other new technologies, individual retail investors are becoming an increasingly influential factor. Previously overlooked retail investors are now able to come together to form large groups with significant power over markets.
However, such groups will often have a less professional approach to communication and decision-making. As a result, terms like “Stonks” or “Tendies” can become integral to understanding what is being discussed among such communities. As absurd as it might seem to some, it was exactly this unconventional approach that caused major disruptions in the market in 2021.
