Wall Street is often mythicized, romanticized and glorified.
To many it seemed inaccessible — a trade reserved only for the rich.
With the advent of the internet and the creation of retail-trading platforms like Robinhood and Webull, the concept of stock trading became more tangible for the common person. The sudden democratization of market trading has made it accessible unlike ever before.
We are at a point where anyone with money and time can realistically invest, with a convenience limited only by the movement of their fingers. Ultimately, the amount of money one has is now the major limiting factor, and a busy life ensures that many don’t have the luxury to dive into the complex and ever-changing world of stock trading.
So, what happens when you mix a democratized stock market with internet culture, quarantined youth, an unprecedented economic situation and a general distaste for the 1%?
You get $GME.
To quarantine and trade:
GameStop has been financially struggling for the past few years, as DVD media is slowly phased out by digitalization. So, when GameStop’s stock (GME) began to slowly increase in September 2020, there was little attention.
In the following months, the stock would steadily rise, until January 2021, when a flood of investors turned the dying GameStop into a Fortune 500 company.
By the end of January, GameStop stock had gone from being worth approximately $17 to over $300.
Mostly responsible for this extraordinary event is an online community, found on the popular social media platform Reddit. Known as “Wallstreetbets,” this community of mostly young adults has become infamous for their mix of internet-culture and high-octane stock options trading. Historically, this community has been at the center of many news headlines and discussions.
Following the rise of the GameStop stock, their community has exploded to over 6 million members. With more eyes on the WSB community than ever, their unprecedented ability to influence and manifest action has never been clearer.
A couple of minutes perusing the community is enough to identify the overwhelming “pro-risk” sentiment of its users. More recently, WSB has shifted towards an anti-elite stance.
Through memes, posts and general discussion, these anti-establishment ideas are communicated to great positive acclaim. Whether this is the result of an influx of new members or a genuine stance of the community remains to be seen.
One thing is clear, however: the buying and holding of GME stock have effectively been used by the WSB community to hurt the interests of hedge-funds, whose shorting profits have been harmed by these developments.
With retail-trading platforms like Robinhood restricting trading due to alleged “market volatility,” serious questions have been raised over the influence of wealthy investors on platforms intended to democratize the stock market.
This has effectively turned the GME stock frenzy into a hybrid between legitimate trading and active protest. To some, this has become a movement to push the limits of options trading and the market at the expense of ultra-wealthy, shorting hedge-funds.
Arguably, the development of these extraordinary circumstances has much to do with the COVID lockdown. With online-time being the highest it has ever been in the US, news and information has an unprecedented ability to spread across social media. Add to this popular figures such as Elon Musk who have retweeted, shared and discussed the situation surrounding WSB, and you get tremendous exposure for their cause.
By last Friday, estimated billions had been lost by short-selling hedge-funds. Some at WSB called it “real wealth redistribution.”
Ultimately, most investing in these “short-squeeze” stocks has no political motivation. Many simply seek to turn a profit. However, for those truly committed to the cause, their dedication is incredible:
As a result of this, the stock market will undeniably change.
Lawsuits against Robinhood for actively trying to hamper the buying and selling of certain stocks will change the retail-trading industry. Government agencies are watching, and may inevitably intervene. All in all, a Pandora’s box has been opened in regards to the powers of retail-traders on the market.
Whether this situation was a vessel for the manifestation of frustration against the 1% or simply an elaborate scheme to generate wealth is irrelevant. Where many once felt disappointed with the results of protests like Occupy Wall Street, they now stand emboldened.
In a truly remarkable sense, normal retail-traders effectively undermined the interests of wealthy hedge-funds, cutting deep into their pockets. If there ever was a way to get the attention of groups like these, this is it.
One thing is absolutely clear — in light of economic inequality and its worsening with COVID, sentiments for real economic reform are stronger than ever.
Through GME, they were simply manifested.