Unless you’ve been living under a rock during the last couple of weeks, you might be familiar with the stock market craze driven by a group of amateur traders in Reddit’s forum WallStreetBets, which caused shares of bankrupted companies such as GameStop, Blackberry, AMC, and BlockBuster to increase their stock numbers up to the sky: only GameStop, the company that started the boom, increased their stocks up to 1,600% in January, and hedge funds shorting the stock ended up experimenting billions of losses when they closed positions.
The unexpected movement created millionaires in just a matter of hours, such as the case of Keith Gill, know as DeepF—ingValue” on WallStreetBets and “Roaring Kitty” on YouTube, who accumulated total stockholdings of 100,000 shares, worth roughly $4 million as of February 19. The user announced his betting on GameStop and bought his first shares in June 2019, when its price was about $5. Shares of the video game retailer climbed as high as $492 last month. Buying power and bets on struggling companies, which was normally reserved for hedge funds, was now in the hands of the people through home-trading apps like Robinhood.
Consequences are unclear
As the stocks price increased and the hedge funds lose money, the surge prompted a series of responses to investigate the movement and stop Wall Street companies from losing money, including Robinhood decision to curb trading in some stocks given the enormous volatility -including GameStop Corp-, the ban of WallStreetBets Discord channel arguing that hateful and discriminatory content had been allowed in their forum, and finally, a congressional hearing on February 18. During the hearing, Reddit CEO Steve Huffman and Keith Gill defended WallStreetBets actions as completely legal, stating that the ultimate forum’s goal was not to manipulate the market. Robinhood CEO Vlad Tenev had participated in the congressional hearing as well, ultimately apologizing for the app restriction on trading, and declining to disclose how much Robinhood’s clients had invested in the app.
The forum has gone mainstream, and even business magnate Elon Musk has tweeted about the movement. Those who have always had the money and the power have had to accept that this group of users has changed the way of investing, but… Is the movement ethical? Many people may argue that the method is merely market manipulation, base on populism, and made to capitalize on public prejudices against millionaires. The extent of such affirmation can’t be proven, and meanwhile, the only thing that stands up as right is that WallStreetBets proved that the internet has become an unexpected source of power and information for people that didn’t have the resources or the knowledge to compete against big corporations.
What’s the next step for WallStreetBets?
It is interesting to see how a group of people with apparently no professional knowledge of trading saw a vulnerability in the traditional stock market and used all their resources and time to take advantage of it. The WallStreetBets movement is not only limited to stocks in Wall Street: users are also investing in cryptocurrencies like DogeCoin. This is a cryptocurrency started in 2013 as a joke that experienced a surge of at least 800%, following a series of tweets by Elon Musk calling it “the currency of the people” and “the funniest crypto”. Dogecoin has surged more than 950pc since the beginning of the year from less than half a penny to more than five cents per coin, as Reddit users have flocked to the joke cryptocurrency based on the meme of a smiling Shiba Inu.
In conclusion, it isn’t clear where this digital market-craze will lead us. But it is changing how the traditional stock market behaves.
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