Over the past few weeks, WallStreetBets, a subreddit community comprising mostly of amateur investors, has gained insane popularity after successfully crippling a hedge fund by short-squeezing their positions.
It was not Gamestop’s fundamentals that encouraged the short squeeze. In fact, the motive was “personal” to a certain degree, a vendetta of sort so to speak. The targeting of hedge funds, otherwise known as the bad guys, is the main reason behind the short squeeze. For an extended period of time, the hedge funds have been exploiting companies and manipulating markets at the expense of retail investors, many of whose lives were financially shredded.
This short squeeze has grown into a personal matter for some of the WallStreetBets investors including a Gamestop investor named Alexis Ohanian. In the forum Alexis Ohanian stated that,
“I vividly remember the enormous repercussions that the reckless actions by those on Wall Street had on my personal life, and the lives of those close to me.
To Melvin Capital: you stand for everything that I hated during that time. I’m making this as painful as I can for you.”
WallStreetBets has become more than a community of people. It is now an internet movement that symbolizes unity. Investors all around the world are also speculating on Gamestop regardless of the traditional measures of valuation. This coordinated squeeze on Gamestop has rewarded investors with vengeance and wealth simultaneously.
As retail investors, it will never be easy to buy stocks with improper and opaque valuations. Speculating on stocks is as close as flipping a coin. Applying traditional measures of valuation towards Gamestop would certainly kill the decision to hop along with other investors.
However, knowing that there is an army of investors armed with cash, lining up to buy Gamestop stocks, gives a level of “false” comfort that it was almost certain the stock’s price would head north.
Jeremy Blackburn, an assistant professor of computer science at Binghamton University who studies extremist communities on the web stated that,
“These guys can move markets.
That is a huge deal.”
Thanks to Gamestop, investors are introduced to a new method of earning money, which is simply coordinated pumps. This new method has proven to be highly successful to Gamestop investors. Under such circumstances, investors also need to suspend traditional measures of valuation or price, in order to be rewarded.
After the GME rally, some cryptocurrencies such as Dogecoin and XRP experienced a surge in price. Dogecoin’s interest on Twitter has surpassed Bitcoin after its recent surge in price. It almost seems as if the attention from the stocks market has shifted to cryptocurrencies.
Cryptocurrencies are facing a huge deal of attention after the GME surge. People are trying to absorb the context and purpose of cryptocurrencies and how they will play a role in shaping our future. The philosophy of cryptocurrencies as a decentralized financial system to replace the existing financial infrastructure that is improperly governed, will eventually sway over more and more investors.
The impact of GME towards the cryptocurrency industry has been phenomenal. It has proven that people will also invest in assets outside of traditional measures of valuation.
Just like how hedge funds have been trading market inefficiences for an extended period of time, the Federal Reserve has been continuously printing money through their policy of quantitative easing. Our cash is debasing at a great rate every year. The recent surge in some cryptocurrencies has shown how investors are trying to protect the value of their assets through reallocations.
Decentralized digital currencies will provide investors with access to an inflation hedge and a safe haven asset class. Cryptocurrencies that trade every single day without a centralized system, with the capability to manipulate or intervene, will be a great attraction for investors. People with different nationalities and backgrounds have the ability to access this new digita; asset, from anywhere and at any time.
A decentralized future is where we are heading. Traditionally regulated markets can halt or suspend trades or transactions but this will not happen in the cryptocurrency market. Decentralized digital currencies will pioneer this movement.
This article is written by Juan Soemarno