The Reddit community named WallStreetBets has taken wall street by surprise and has had an alleged impact on several stock markets that have been on their lowest. Taken by surprise, or has the traditional stock market underestimated technology's power and new ways of organization within social media?
Let’s not get ahead of ourselves and start by understanding the chaotic and entertaining week in the stock market and recently in the crypto universe.
Chaos in wall street because of GameStop's increased stocks. It has not only happened in traditional stocks; the crypto world has also been part of the recent news, this due to Altcoin, Dogecoin, recent pump, jaws dropped when traders and crypto enthusiast saw its value skyrocket.
The chaos with significantly low stocks has gone over the roof and allege price pumps coming from TikTok and Reddit.
“It’s been maniacal this month. After sitting around $18 three Fridays ago, it doubled in four days. It kept shooting higher, before nearly doubling on Tuesday and then more than doubling again on Wednesday to $347.51. On Thursday, it gave back a chunk of those gains and finished the day at $193.60, down 44%. But it’s still up an amazing 928% through the first few weeks of 2021.”
But why GameStop? It could have been any other; these are some of the reasons circulating the net:
“Enthusiasm has grown for GameStop’s prospects after the company said earlier this month that a co-founder of Chewy, the online seller of pet supplies, was joining its board. Investors see Rya n Cohen helping GameStop’s digital transformation.”
“…group called “WallStreetBets.” Their discussions are full of ideas for the next big trade to jump on, self-deprecation, and an appreciation of both winning and losing bets, as long as they're bold. They've recently been encouraging each other to keep buying GameStop and push it ever higher, or "to the moon."
“A big reason for that is how deeply hated GameStop’s stock was by hedge funds and other professional investors on Wall Street. Many were betting on GameStop’s stock to fall by “shorting” it.”
The term shorting in stock seems to be on every financial news article today, but for those of us who aren’t big-time investors and still newbies In this investment and crypto world.
What does the term shorting consist in?
“Short selling is a fairly simple concept—an investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender.”
“Short sellers are betting that the stock they sell will drop in price. If the stock does drop after selling, the short seller buys it back at a lower price and returns it to the lender. The difference between the sell price and the buy price is the profit.”
Wall Street has always been the big boss. Still, more than wall street, all traditional stock markets have to face the beauty of technology and, with technology, organization beauty within platforms. Whether you believe it or not, these social media platforms have the capacity to move the masses. Some say this may not be the real reason behind the highs we have seen on the GameStop stocks.
“What we do know is that all this activity appears to have created a "short squeeze," where the short-sellers betting against GameStop are being forced to buy more GameStop stock to cover their losses. That pushed the price up even more, which forces more short sellers to cover their losses, which pushes the price up even more".
Overall, these reasons, the one that has been on every news article is the Reddit community behind, and the reasons may well be the ones mentioned above.
It's crazy how prices can be manipulated in such a way by these social media platforms.
Is it too crazy? Why blame a social media platform. I believe this has always been done, but maybe by a bigger player such as government entities, known celebrities, and financial institutions, why can they share a comment and significantly impact different markets? Why is it so wrong when commoners do this? Maybe they freely expressed it on the Reddit platform, alleging that these short sellers were wrong and had to do something about it.
Do you honestly think the government or other entities do not know the impact they might have on a particular stock? I believe they do, and it's worse because they probably have millions and billions invested and can even pump up their stocks right in front of our eyes. I have never seen anything being done to punish this? Nonetheless, a community on Reddit sufficiently organized to pump up a particular stock revolutionizes everything and even gets limited on the number of trades that can be done in that specific stock? How is this possible? Maybe it's because this Reddit community is not on the powerful people agenda?
Copying the movement, now as some sort of game, SatoshiStreetBets appears. You have to admit this all very entertaining.
“The virtual currency, which originally started as an internet parody based on a viral dog meme, has skyrocketed 373% in the last 24 hours, according to Coinbase. At one point, it was up 613%.”
Even tweets from Elon Musk and others appeared supporting Dogecoin. How can someone control these tweets or these movements? I guess not. I am just bummed I didn't have any Dogecoin! Let see what crazy new stories 2021 bring because I am sure we have only just begun.
By: Carolina Pérez