“It’s a Whole Other Level of Insanity”: How Pandemic Day Traders Are Turning Wall Street Upside Down

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.”