The joint power of a decentralized group of retail investors brought hedge funds to their knees. The combination of Bitcoin & crypto with WallStreetBets will be lethal against the old financial order.
If r/Wallstreetbets, the now world-famous subreddit group with close to 8 million retail investors as members, has shown anything above all else it’s the power of decentralized communities when facing the legacy finance world.
To understand the monumental nature of the past weeks’ events in relation to how decentralized networks, currencies and communities will be able to dictate the future of finance, let’s do a brief rundown of what actually went down as a ragtag community of retail investors took on billion-dollar hedge funds.
What Actually Went Down?
The principle behind WallStreetBets, or WSB as it’s commonly known, is quite simple: When enough people join together and buy a stock (or any commodity for that matter), the price goes up. As a result of the WSB community buying the previously falling GameStop (GME) stock, hedge funds such as Melvin Capital and others suffered from their short bet against the GME stock.
Melvin Capital was short-selling GME, essentially betting heavily that the company's shares would drop. However, WallStreetBets joined countless of decentralized retail investors into buying the stock, which made GME’s stock to skyrocket more than 1,600%, as the price went from $10 to a high of $469 in mere weeks (currently trading at $238). Reports now indicate that Melvin lost over 53% of their capital in the GME short-squeeze event instigated by the WSB Reddit community.
Robinhood Halts Trading
Consequently, brokerage firms and major stock apps like Robinhood and TD Ameritrade blocked their traders from buying GameStop and other stocks that the Redditors were jointly buying to punish the short-selling hedge funds. Mounting criticism against this decision has been unprecedented in its scope, and has naturally pushed many in the WSB community to express the need for decentralized alternatives to these centralized brokers who arbitrability decided what stock you can buy and not.
These condemnable and unfair actions are clearly against the core principle of decentralization, as decentralized financial networks instead promote individual ownership and freedom of choice.
Bitcoin & Crypto’s Time To Shine
Luckily, an alternative already exists in Bitcoin, cryptocurrencies and digital assets. Satoshi Nakamoto kick-started a financial revolution with the launch of Bitcoin 12 years ago.
Bitcoin and the entire crypto industry is currently experiencing somewhat of a perfect storm with macroeconomic conditions warranting their thriving existence. Interest in BTC and other cryptocurrencies is growing daily, weekly, monthly and yearly. For all the right reasons.
The driving factor behind many of WSB’s members is rooted in the same financial crisis of 2008 that Bitcoin was born out of in 2009. The fact that banks and hedge funds were bailed out while retail investors, regular workers and homeowners were left out in the cold, literally and figuratively, taking the brunt of the financial impact that the market crash of 2008 resulted in.
Bitcoin was created as countermeasure against the overarching control of governments, banks, central banks, hedge funds and the old financial legacy system, over both the micro and macroeconomic state of affairs.
Satoshi Nakamoto wrote of the core problem facing conventional currencies, namely the trust needed in the institutions that make the financial policy around fiat currencies:
”Central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust… Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.”
Whatever trust that existed in the financial institutions of old is quickly eroding as people around the world are awakening to the fact that they can join together to have a bigger impact against Wall Street, as well as take custody of their finances through cryptocurrencies to empower themselves, not the banks.
Just like Bitcoin, the WSB community is much more than simply a group of retail investors targeting a certain stock against short-selling hedge funds: It’s an idea and a mindset expressing a growing number of people’s frustration around the world, who are tired of the old ways and have lost trust in the financial institutions ruling their lives.
Billionaire and majority owner of Dallas Mavericks, Mark Cuban, who also happens to be a newfound Bitcoin and crypto advocate, said in a blog post on January 31 that day traders are shaking up the status quo by applying the rules of digital assets to the stock market.
“younger investors have learned from trading Bitcoin and other cryptocurrencies that they can collectively boost the prices of digital assets and generate wealth for all involved…” Cuban wrote.
"WSB traders are applying the same principles of the digital/crypto world to the stock market and they are loving the fact that the old schoolers are hating it… The old-schoolers think they are smarter. They are not."
So, WSB members are rising up, but not in the conventional way of executing revolutions. Instead, they are doing so through a decentralized community of like minded individuals who share similar disdain for the current global financial order, which is evidently broken to its core. It is a powerful force.
Crypto Is The Solution
Beyond the obvious advantages of decentralization, immutability, borderless nature and true individual ownership that Bitcoin and crypto assets offer, trading and holding cryptocurrencies are inherently different from stocks since the markets are operational 24 hours a day, 7 days a week, 365 days a year. Crypto simply never stops.
One of the principal beauties of Bitcoin is that there is no need for trust in a central third party. One of the foremost advantages of cryptocurrencies as a whole is the ability to have custody of your money through secure self-custody wallets like Klever. The result is that no government, bank or brokerage platform can touch your funds or tell you what to trade and when.
As a clear sign of the WSB community truly opening up to and embracing Bitcoin and crypto came as this article was about to be published. An influential twitter account with over 900k followers under the avatar @WSBChairman, unaffiliated with the official r/WSB twitter (@wsbmod), posted a series of tweets going full-on Bitcoin and crypto evangelist:
A growing part of the WSB community is now about to fully realize the potential of moving their decentralized community ideals of retail investors into the decentralized world of Bitcoin and crypto.
This move will result in a retail growth in the cryptocurrency market never before witnessed, not even during the bull run of 2017-18.
Or as Elon Musk would say about his now open Bitcoin support:
The combined forces of the decentralized communities of Bitcoin & crypto holders together with WSB retail investors worldwide will be a lethal weapon against the old financial order.
Director of Communications at Klever.io