29/1 – The hedge fund, Melvin Capital decided to take out a short position on GameStop (GME), a high street game retailer, effectively betting that the price of the asset would drop low enough for them to cash in. What hedge funds get out of opening such positions on companies massively effected by a global pandemic is beyond me. There is obviously the economic incentive but something doesn’t sit right with me and a lot of other people too…
Introducing r/wallstreetbets… a subreddit dedicated to discussing the best opportunities in the stock market. The community consists of 6.3 million “degenerates” managed to successfully pump the stock high enough which liquidated the short and effectively cost Melvin Capital $2.75 billion…
So why are we talking about stocks? Well, it’s the response to this story that has ties to the crypto world.
Robinhood, the “commission-free” retail trading app for stocks where the majority of the WSB community were buying the GME stock to drive the price up, halted further buying on their platform to prevent an increase in retail investors driving the price up further. The same happened for AMC, the cinema chain which was another heavily shorted stock.
The irony of Robinhood preventing average joe investors from taking from the rich and giving to the poor is unbearable and there has been a mountain of backlash, including a request for a public hearing in congress.
The ugly truth behind all this is that the not-so-commission-free app, Robinhood, managed to monetise its exchange by feeding the order flows of its app users into the hands of paying companies who can then preempt the market moves and bet against them. Funnily enough, Citadel securities who bailed out Melvin Capital are Robinhoods number 1 customer…
Centralised exchanges that are run by a central authority can do these kinds of things. Bitcoin, DeFi and Decentralised Exchanges like Uniswap and Pancake Swap solve a lot of these trust issues.
Now don’t ask me why the internet has decided to pump Dogecoin, I don’t have an answer for that…Other than the less it makes sense, the more it increases. Much pump.
This is a true David and Goliath story and one in which I believe will be the catalyst to people flooding into cryptocurrencies as they will see the trustless and decentralised nature of it all. Transparent and permissionless markets are on the horizon with DeFi and DEX whilst privacy coins such as Monero and Zcash are also on the up.
Finally, on the back of all this commotion, Elon Musk decided to help the crypto space out by first tweeting out this below:
And then by adoption the Bitcoin hashflag and putting it in his Twitter bio. His tweet sparked numerous big names in the community to follow with the tweets “Bitcoin in Bio”.
So, all in all, a pretty quiet week… If you don’t hear from us next week it is because we put everything on $DOGE and are either millionaires or can’t afford our internet bill.
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