It’s hard to do justice to the symbolism and significance of the Reddit-Robinhood-GameStop drama of this past week.
That’s not to say it hasn’t been overblown in some quarters. I’ve heard it compared to the Capitol riots – no, that was sedition, this is rebellion, very different. I’ve seen calls for the regulators to step in and shut down retail trading platforms, even though it’s not clear a crime has been committed. And I’ve read takes painting the leaders of this charge as “misfits.” That condescension itself is part of the problem.
The protagonists are not misfits – they are retail investors flexing their collective muscle, the very same muscle the “establishment” encouraged them to develop.
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Retail investors were encouraged to invest their savings in the stock market. They were offered mobile apps that made it easy. They were bombarded with advice and ideas from mainstream media. They were given money to spend. And low yields pushed them up the risk curve.
Making way
While the attention has been focused on a handful of stocks that have seen astronomical gains on the back of retail enthusiasm, the origin and the result (whatever that ends up being) have a lot to do with the crypto markets.
We’re not trying to steal anyone’s thunder. The WallStreetBets channel that galvanized the troops and led the charge did not welcome crypto traders or even chatter. Their drivers are not decentralization or fair access – rather, they seem motivated by glee at their newfound power, and anger.
The anger runs deep. The 139% short position against GameStop signaled heavy hedge fund involvement – but this was a trigger, not a cause. This rebellion feels like an expression of pent-up frustration at the skewed rules of capital markets that entrench the power of the “elite,” combined with residual resentment over the 2008 bailouts, the lack of market transparency and a long list of generational grievances.
A similar “old” vs “new” mindset drives the crypto markets.
Many of us were drawn to bitcoin out of concern for the impact on individual prosperity from defensive decisions taken by entrenched interests. Others were attracted to the concept of decentralized finance as an antidote to the potential damage done by consolidated power. And there’s the strong vote for financial sovereignty and commercial freedom.
All of us watched how traditional finance initially rejected the notion that a programmable token could ever have value or that code could produce yield. The success of crypto markets has forced much of the “old guard” to gradually recognize that things are changing. The events of…
Read More: GameStop, Dogecoin and a New Market Paradigm