I. Wall Street & GameStop
Over the past two days, global investors have witnessed history again! Retail investors waged a war of “short squeeze” against Wall Street hedge funds by buying GameStop’s stock called GME and drove it to soar 1700% in 9 trading days!
Amid the restless rising in the first three days,
|Citron Research, the famous short-selling institution, surrendered, closing all of their short positions;
|Point72, the world-renowned hedge fund lost $750 million;
|Citadel, another hedge fund, has lost all of its $2 billion;
|Melvin, a star hedge fund managing hundreds of billions of assets, was liquidated and is on the brink of bankruptcy.
What the hell has happened between retail investors and short selling institutions?
In the past, retail investors were too often exploited by Wall Street institutions. But on January 19, the tide was turned when Citron Research, known for its short-selling report, suddenly took a bearish stance on GME.
Citron Research has a track record of defeating more than 20 companies (16 of which lost more than 80 percent of their share price in a year after the short-selling report, and seven were delisted). Its short-selling information is like the “curse of Tutankhamun”. No company can survive if Citron Research targets it.
Citron Twitted that GME’s shares were worth only $20 and that “$GME buyers at these levels are the suckers at this poker game.”
This comment instantly infuriated the r/wallstreetbets (WSB), a mysterious group in Reddit.
Ok, let me explain what Wall street bets (WSB) is.
Wall Street bets (WSB) is a subreddit in which the members are a group of investors addicted to stocks and options. Most of them are young traders and never believe in rational and value investment. Instead, they treat the stock market as a casino, thinking about be turning rich overnight by going all-in or become the Wolf of Wall Street.
“It’s not about the money. It’s about sending a message”. Citing the lines of Joker, the retail investors began the first revenge against the institutions.
GameStop is a brick-and-mortar video game retailer whose shares are the most hated by hedge funds, which triggered anger and attacks from retail investors who believed that the new CEO would bring considerable changes to GameStop’s business. So they called on investors on the Internet to continue to buy the GameStop shares to squeeze out the short-sellers.
They called buying stocks “YOLO,” which stands for “you only live once”.
It is learned that r/wallstreetbets is active with many young investors who believe in YOLO culture, what they did boiled down to buying the wildest stocks with the highest leverage.
They rallied against short sellers in online chat rooms. On their Sub-reddit, which has more than 2m members, novice investors encouraged each other to buy GameStop shares and call options, causing a massive short squeeze.
On January 22 (last Friday), GME opened for trading:
In the 1st hour, GME price jumped 5%;
In 2 hours, GME price rose 10%;
In 3 hours, GME price soared 40%!
In 4 hours, GME price skyrocketed 70%!
Employees of Citron Research and their families were threatened online and offline, which made Citron Research give up their comments to protect their families.
Using a new Twitter account, Citron issued a statement, where Andrew Left, Managing partner of Citron Research, said that they will “no longer be commenting on GameStop”, because “the angry mob who owns this stock has spent the past 48 hours” allegedly committing crimes that Left will turn over to the the FBI, SEC and other governmental agencies. This letter appeared to reference the harassment that Mr. Left’s family and friends had received after disclosing his GameStop essay a few hours earlier.
He adds that he hopes the government will step in and eliminate this issue for other market commentators “whose families get terrorized by people who naively think they are anonymous,” Left wrote in the letter.
So will Wall Street give up?
II. Wall Street’s Counterattack
Retail investors buy shares through a brokerage APP called Robinhood.
Robinhood developed its business by cooperating with Youtube influencers, which attracted a large number of young investors. They made a lot of money from this WSB movement in a short time.
As I mentioned, a lot of Wall Street institutions have been burned by retail investors.
Wall Street has mobilized presses and medias to accuse retail investors of maliciously inflating the stock price so that the value of the stock is wildly out of line with the actual performance of the company and undermining the health of the financial markets, an attempt to discourage retail traders from longing with their alleged “truth”.
But this time, the media’s public opinion control failed, and their accusations were responded with a fiercer backlash from young investors.
Being furious, Wall Street has resorted to a second plan: “Investment ban”
The DTCC directly ordered Robinhood to block trading rights in 23 stocks prone to long positions, including GME, and raise $1 billion cash margin in an emergency, leaving retail investors with no more shares to buy.
This time, it was not just retail investors who were angry. Some members of the Democratic Party and the Republican Party have joined the fray.
III. From Stock Market to Crypto
As stock trading channels are limited, WSB members are in an urgent need of a new channel to buy wildly. Just at this moment, Elon Musk, the boss of Tesla, who has been very supportive of the WSB movement, released relevant remarks about supporting Dogecoin, which became the next buying target.
On January 28 and January 29 alone, the Dogecoin market value was lifted by 2000% by the WSB legion and retail investors who wanted to follow the trend.
According to DigiFinex: During January 28, 2021 10:30 — January 29, 2021 11:25, Doge quickly soared from $0.004 to $0.083
It is said that the craziest Doge buyer, with 1000 yuan of principal and 100x leverage, earned 1 million RMB!
It turns out we were just 1 WSB away from being a millionaire.
Gentle reminder to purchase DOGE here: https://bit.ly/36BaM9b
Now it’s not just the U.S. stock market investors who are crazy about the WSB. The enthusiasm of crypto traders who initially pursued high risk and high return was also wholly triggered. We would follow the WSB to buy whatever it bought with more principal and higher leverage. Wall Street Bets was no longer a big casino exclusive to Wall Street users but a carnival for all investors.
On January 29, 2021, WSB investors began to pour into long XRP (Ripple), the old cryptocurrency, which made XRP’s price jumped from $0.25 to $0.76 in just three days!
According to DigiFinex exchange, XRP increased rapidly from $0.25 to $0.76 from January 29, 2021, 10:00 to February 1, 2021, 19:00.
Trade XRP: https://bit.ly/2L8AwC6
So, what’s the next target to be pumped by WSB?
Maybe you are The One to find out the answer.
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