TA pipe of you with children and grandchildren may at some point have entered a GameStop. If so, you may be familiar with the video game retailer’s slogan: ‘Power to gamers’.
The same tagline might just as well be the rallying cry for the millions of Millennial and Gen Z Reddit users who traveled to Robinhood last week to raise the beloved’s share price but in GameStop difficulty.
(Fun fact: Ross Perot was an early start-up investor in GameStop’s predecessor, Babbage’s, which opened in Dallas, Texas, in 1984.)
You’ve probably heard the whole story before. But just in case: A number of hedge funds, including Melvin Capital and Maplelane Capital, took short positions on GameStop, whose sales were lagging before the pandemic even killed foot traffic. In response, anti-Wall Street organizers on Reddit urged readers to mass-buy GameStop options to catapult its stock “to the moon.” This in turn forced Melvin and others to buy GameStop shares at much higher prices to cover their positions, resulting in losses of several billion dollars. According to a Wall Street Journal report, Melvin lost more than half of its investments in January.
GameStop, meanwhile, rose from around $ 19 per share to $ 325, an increase of over 1,600%. The stock traded $ 100 billion in shares last week, more than Apple and Amazon, according to Eric Balchunas of Bloomberg.
To traders who really care about the survival of the business, I would suggest that they consider supporting it by spending their money on it this weekend.
The Reddit-fueled rally had a huge impact on price discovery not only in GameStop, but other oppressed stocks as well. Shares of movie theater operator AMC Entertainment, housewares retailer Bed Bath & Beyond, BlackBerry and Tootsie Roll Industries also rose. Even Blockbuster’s liquidating holding company has seen surreal trading levels, with its daily volume dropping from zero just a month ago to nearly 24 million shares on Thursday.
Today, the price of silver has also surged thanks to the Reddit forums, reaching an eight-year high of $ 30 an ounce in intraday trading.
Gil Scott-Heron, considered by many to be the first rap artist, informed us in 1971 that “The Revolution Will Not Be Televised”.
It might be, but it will be tweeted, shared on Instagram, voted on on Reddit, and traded on Robinhood commission-free using decentralized Bitcoin and Ethereum. “Power to the players” indeed.
In support of the democratization of capital markets
No matter where your opinion falls in all of this, you can’t deny that it’s historic. To my knowledge, nothing like this has ever happened before in capital markets, where millions of small traders, many using their $ 600 stimulus checks, have worked in tandem to cripple wealthy institutional investors, pulling party of their own trading strategies against them.
Metro-Goldwyn-Mayer (MGM), in fact, has would have acquired the rights to the film to a still unpublished book on the Reddit-GameStop saga. The working title of the book? The anti-social network.
In the process, a number of GameStop traders have earned life-changing amounts of money.
Let’s be clear: I support Robinhood’s mission to democratize capital markets and finance, but like democracy itself, things can get complicated at times. What Redditors do is not invest. It’s not the same as Robinhooders buys airline shares last May after Warren Buffett abandoned his positions in the Big Four carriers.
It’s not even speculation. It’s activism – think of it as some kind of anti-Wall Street “Arab Spring” – and I’m afraid some young people will get hurt when the bottom falls.
Robinhood clearly felt the same when he stopped trading some of the heavily shorted stocks (and, on Friday, up to 50 more stocks). The online broker, whose tagline is “Investing for everyone,” attempted to clarify its decision in an email last week, saying the temporary restriction “has not been made on the direction of any content. market to which we supply or other market participants ”.
Robinhood also highlighted its long-standing mission to open capital markets to more people, including younger and non-traditional investors:
Dalio: Bitcoin is “a hell of an invention”
This brings me to Bitcoin, Ethereum, and the crypto ecosystem in general, which also helps democratize finance. When you use a card to pay for your Starbucks, a third party stands between you and the transaction. With Bitcoin and Ethereum, payments are peer-to-peer, open, and free to cross borders.
For this reason and more, Ray Dalio last week called Bitcoin “a hell of a invention.”
In one blog post As of January 28, the founder of Bridgewater wrote that it is an “incredible achievement” that Bitcoin has “rapidly gained in popularity both as a type of money and as a store of wealth”. He added that, to him, Bitcoin looks like an attractive long-term option that he could someday invest money in.
Dalio’s comment, I believe, underscores the fact that cryptos are rapidly becoming mainstream – as an investment, as a store of value, and as a currency. It is no longer just speculators who participate, but well-known and well-respected investors and organizations.
The penultimate week, in fact, of entries into cryptocurrency funds and products hit a new record high of $ 1.31 billion, according to CoinShares. So far this year, Bitcoin has recorded an average daily transaction volume of $ 12.3 billion, up from $ 2.2 billion last year.
Another sign that Bitcoin is growing in popularity: The number of Bitcoin wallets that contained a positive balance hit a new high in 2020, according to Coinbase 2020 review. It is estimated that 33.2 million wallets contained Bitcoin, an increase of 16.8% from the previous year.
The rise of DeFi, a competitor of traditional financial services
Decentralized Finance (DeFi) also continued to grow in 2020. In short, DeFi has the potential to completely disrupt the traditional financial services industry by providing “global, programmatic, decentralized, 24/7/365 markets” for services. as diverse as the subscription. loans, invest in derivatives, trade assets and buy insurance contracts. For the first time, the development of financial products has been put “directly in the hands of engineers, who no longer need to work in a bank and” ask permission “to create products”.
According to Coinbase, 1.2 million DeFi users worldwide have taken advantage of these open source systems. The number will only grow.
I think one of the biggest signs that open source technology is giving mainstream finance a run for its money is that today a single Bitcoin is enough to buy between 100 and 150 stocks. each of the four big American banks. Compare that to five years ago, when a coin could only buy you one share each.
We were at the start of the crypto ecosystem
That said, I couldn’t be prouder to have helped bring HIVE Blockchain Technologies on the market more than three years ago. It remains the only crypto miner that operates both Bitcoin and Ethereum.
Today, I am pleased to report that HIVE ranked number four on the 2021 OTCQX Best 50, a ranking of the best performing companies on the cheapest OTCQX market based on 2020 total return and average daily dollar volume growth.
Originally published by US funds, 2/1/21
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.