By CCN.com: Beyond Meat (BYND) is Wall Street’s newest darling. After its stock rallied 168% in the best IPO in a decade, the vegan burger maker continues to impress while the rest of the Nasdaq suffers heavy losses. There is an unfortunate truth beneath all of this hype, and to explain it we need to look no further than the Bitcoin bubble.
When cryptocurrency exploded into the public consciousness in 2017, led by meteoric gains in Bitcoin, everyone wanted to talk about blockchain. The groundbreaking technology that underlies many digital coins was so new that there was almost no way to play it outside of investing directly in cryptocurrency assets.
Beyond Meat is in precisely the same situation, except in the world of vegan meat. A rapid increase in valuation often creates an extremely “bubbly” situation. Longer term, bubbles are fantastic for disruptive industries. The attention they bring loads the fledgling technology with an abundance of capital to make the developments they need.
For nervous investors, however, bubbles can be a disaster.
Beyond Meat loses money and still has a long way to go before their meatless burger entirely displaces the beef establishment. A bubble is the only way to get enough money into their hands to stand a chance.
If Bitcoin had not rallied to $20,000, there is no question that Crypto Winter would have been a lot longer and a lot harsher than it has been.
Similarly, the avalanche of interest in internet companies is what created the dotcom bubble that ultimately spawned Google, Amazon, and the like – slaughtering scores of other tech startups in the process.
As capital flowed relentlessly into Bitcoin, Wall Street copycats tried to get in on the action with ludicrous plays like “Long Blockchain.”
Other companies will see the success of BYND and dive headlong into the plant-based meat industry. Tyson Foods plans to join the party, which is a bit like Exxon Mobil investing in wind energy. Impossible Foods will now certainly be courted to go public and swipe a piece of market share.
We all know what happens when the bubble bursts. You grow disillusioned and focus more on the asset’s flaws than its underlying potential. It doesn’t matter that you know it will eventually change the world because people can’t short it fast enough. Ultimately, the eduring value will create a price floor, but your belief is gone. Finally, the early adopters move in again and buy it cheap while you sit paralyzed.
The point is this: given the unique market position that Beyond Meat holds, a price bubble looks inevitable. With 170%+ price gains in its first few days of trading, this prophecy is becoming a reality.
The fear of missing out is real and powerful. Bitcoin traders have learned that Hodl is more than a meme; it’s the only way to survive the roller-coaster of investing in a frontier market. BYND bulls will need to be equally resilient.
Last modified: July 2, 2020 8:10 PM UTC