The emergence of the Wall Street Bets subreddit’s short squeeze of Gamestop’s stock has led to some interesting terminology. This article will explain the two most popular phrases that you see on this part of the internet – paper hands and diamond hands.
What Are Paper Hands?
Paper hands are exactly what they sound like when applied to stocks. Paper hands refers to investors that buy a stock and then sell it at the first downturn. This is used as an insult to describe weak investors by members of Wall Street Bets.
These weak investors have an investment strategy that resembles paper. They break, fold, and sell at the first sign of any weakness. A strategy like this goes against the ethos of Wall Street Bets. The ideal investor on Wall Street Bets, more accurately called a gambler, will hold onto their investment through terrible downturns.
This brings us to the inverse of paper hands.
What Are Diamond Hands?
Diamond hands refers to investors that hold their investment through terrible downturns or even through magnificent upswings. They have hands like diamonds – hard and unbreakable. Not even a 40% downturn in a trading day can get an investor with diamond hands to sell their position.
In fact, an investor with diamond hands will likely purchase more stock during a downturn because they have so much faith in the stock.
Diamond handed investors are the ideal investor on Wall Street Bets. They perfectly fit the ethos of Wall Street Bets – taking wild bets on long shot stocks and holding those positions until they eventually become profitable.
Diamond Hands vs Paper Hands: Which Investment Strategy is Best?
It is difficult to describe which investment strategy works best because this varies greatly depending on the investment. Some investments are simply terrible investments for long term purposes.
For instance, Gamestop was good during the short squeeze. A short squeeze follows market fundamentals. However, it does not make much sense to invest in Gamestop as a long term investment. The company is a brick and mortar business that will lose out (long term) to Amazon, Steam, and ecommerce companies.
On the other hand, Bitcoin investors from 2013 with diamond hands would have made significant gains if they could withstand multiple increases of over 1000% percent and subsequent decreases in the hundreds of percent.
Remember, diamond hands refers to not selling during a downturn and not selling during a massive price increase.
The most notable example of cryptocurrency investors with diamond hands are the Winklevoss twins. They purchased $11 million worth of Bitcoin in 2012 and 2013. The exact amount they purchased is unknown, but rumors are they purchased some of it for as little as $10.
The twins have not sold any of the Bitcoin. Their Bitcoin holdings alone made them billionaires during the most recent spike in price.
To summarize, diamond hands and paper hands are probably not a good investment strategy. But a diamond handed investment strategy makes the most sense for cutting technology that can change the world.
It does not make much sense for a company in a dying industry. The caveat with Gamestop, of course, is that it was an extremely shorted stock.
That was a fairly thorough explanation of diamond hands and paper hands. As mentioned previously, it’s relatively new terminology used almost exclusively online. The most important takeaway from this article is that ‘paper hands’ is almost exclusively used as an insult about someone’s investment strategy.