Phooo… you’re gonna want to strap in for this one.
Unless you’ve been living under a rock, you would have heard of the turmoil in Wallstreet, getting their asses handed over to them for extreme naked shorts on video game retailer Gamestop, by a ragtag group of retail investors in Reddit, no less.
If you did not understand the above paragraph, well, let’s dig into it, shall we?
Who are the players in this Gamestop saga?
- Gamestop, a bricks and mortar video game retailer
- Wallstreet thugs and short sellers Citron Research and Melvin Capital, among other wallstreet hedge funds. Citron was previously a notable bear on Tesla and Shopify
- r/wallstreetbets, led by u/deepfuckingvalue
- Chamath Palihapitiya, Billionaire CEO of Social Capital, former Facebook exec
- Elon Musk, Richest man in the world with zero fucks to give
- Robinhood, an ironic name
The environment that set this off
A bunch of quarantined, bored off their socks retail investors with some stimulus money to spare, a rising pent up anger against the establishment, a reckless bet from wallstreet.
It all began with Gamestop. The retailer was already bleeding in 2019, given that many folks will simply buy their consoles and games online, a brick and mortar video game retail store simply didn’t make sense.
Wallstreet correctly saw this, but stupidly went all in selling naked shorts. And somehow, the regulatory framework around shorting was lacking, such that the number of Gamestop shares that were shorted, ended up being more than there were physical shares.
I don’t know how that is possible, but here we are.
A retail investor with the username r/deepfuckingvalue spotted this, and the game is on. I think the question of valuation goes out the window when you see a short of this magnitude, because at some point, all the shorts need to buy back. And if there are more shorts than there are shares…
u/deepfuckingvalue’s original Gamestop analysis
He’s actually been on to Gamestop for a while now, and published a deeply detailed analysis on why he thinks the stock is undervalued.
He posted his video on youtube, and subsequently his positions on reddit, and it took off from there.
As the thesis gained momentum, and it became apparent that, for the first time in probably forever, that Main Street could very possibly stick it to Wall Street, in revenge for decades and decades of market manipulation and recklessness in causing the 08 crisis, redditors began bidding up GME stock in droves, with encouraging mantras like “Apes together, strong” and “diamond hand” emojis.
This is the result and action that has been spanning over the last week.
Here come the cavalry
And so, the battle for Gamestop began, and waged, with retail investors piling bodies in, pushing the prices up into an inevitable short squeeze.
But the story wasn’t done. Reddit was about to get some very helpful hands in the form of Chamath and Elon, billionaires who didn’t especially like the establishment very much.
Sure enough, they helped propel the stock above $400 at one point. Of course, they weren’t the only big boys on this side of the trade. Earlier, Scion Capital, also disclosed a long trade on GameStop. Scion is run by Michael Burry. If the name is familiar, Michael Burry was the man who correctly called the 2008 crash and inspired the film The Big Short, and was played by Christian Bale.
BlackRock was also long GME.
Robinhood goes AWOL
Just when it seemed the gamma squeeze was inevitable, Robinhood RESTRICTED trading on the stock, stopping users from buying it, and only allowing people to sell the stock.
This eased the price action on Thursday, but by Friday, it was back up over $300! Users were furious and calls for #DeleteRobinhood echo-ed through the internet, with many users coming forward with their recommendations of other trading platforms in real time, based on their own successes with the apps.
Robinhood restrictions shine a light on Crypto and DeFi
It is clear that in the aftermath of this episode, we will see a huge trust erosion on traditional finance players, and will see a massive shift toward crypto and DeFi, ing a light on blockchain based permissionless trading and access to financial markets.
Even Elon Musk has now changed his bio to a single word. #Bitcoin.
Cool.
Major exchanges such as Kraken, Coinbase and Huobi has reported a crazy amount of new user registrations over the weekend.
It is highly likely we will see some interesting price action into Bitcoin and other crypto over the first week of Feb, as a few important events take place:
- New users getting their KYC done and accounts approved.
- MicroStrategy’s bitcoin conference happening 3/4 Feb.
- Ongoing events of the Gamestop saga, with retail investors plowing their Gamestop gains into crypto.
An unexpected beneficiary
As the saga rages on, an unexpected beneficiary came in the form of Ben Mezrich, author of The Accidental Billionaires that was adapted into The Social Network.
He is proposing to write a book about the Gamestop saga, tentatively titled The Antisocial Network. Now, he hasn’t written the book yet, but he has already sold the movie rights of the book to MGM, to be produced by Winklevoss Pictures.
Yes, the same Winklvoss twins, the antagonist in The Social Network turned protagonists in Ben’s spiritual sequel, Bitcoin Billionaires, which is also incidentally being adapted into a movie.
I am watching with interest how this all unfolds.
After all, I am with the degenerates.