GameStop, the video game retailer at the center of the meme stock frenzy earlier this year, witnessed a resurgence in its stock price as individual traders fueled a new rally. However, experts warn that the current rally might be shorter-lived and more restrained than the previous one.

Led by investor Keith Gill, popularly known as "Roaring Kitty," individual traders formed a formidable force by purchasing GameStop shares, pushing up its value and challenging hedge funds that had shorted the stock. This collective effort created a phenomenon called a "short squeeze," forcing hedge funds to buy more GameStop shares to cover their losses.

During the squeeze, GameStop's shares skyrocketed by over 1,000% in just a few weeks, causing significant losses for short-sellers. Analytics firm S3 Partners reported that short-sellers lost more than $6 billion compared to the previous year. Hedge funds like Citron Capital and Melvin Capital, which had substantial short positions on GameStop, were particularly hard-hit.

Citron's founder, Andrew Left, announced that the company would no longer publish short-selling research at the height of the meme stock mania. Meanwhile, Melvin Capital received a $25 billion lifeline from Citadel but ultimately shut down its operations in 2022 due to the aftermath of the squeeze.

Roaring Kitty's recent return ignited another surge in GameStop's stock price. At the close of trading on Monday, the stock had risen by almost 75%, extending its gains into Tuesday before experiencing a slight decline on Wednesday.

However, experts caution that hedge funds are now more prepared to handle meme stock-related volatility, having learned from the events of 2021. Mario Iachini, senior vice president at Vanda Research, noted that quant/hedge funds are better equipped to handle such situations nowadays. They are likely to participate in the squeeze alongside retail traders but also take positions against them and exit trades before retail traders, minimizing their exposure.

Despite the renewed rally, short-sellers collectively lost over $2 billion in just two days. Although they managed to recover about half of that when the stock started to decline on Wednesday, the rapid drop-off confirmed predictions that the current meme stock rally will be shorter and less intense than before.

Dan Egan, the head of behavioral finance at investment advisor Betterment, believes that many meme stockholders who bought during the previous rally are looking to exit. As the stock reaches higher price points, those with losing positions will be motivated to sell, exerting downward pressure on the price.

As GameStop's meme stock rally resurges, it faces challenges from hedge funds that have learned from past experiences, along with potential selling pressure from meme stockholders seeking to cash out. Only time will reveal how long this rally will last and the ultimate impact on GameStop and the wider market.