Everyone has heard of Wall Street as it’s one of the biggest trading centers in the world. Located in Manhattan, New York, it is the capital of all of America’s financial markets and has come to represent all of the US’s economic power. It was initially built by the Dutch and since it was built it has impacted the lives of every American. The activities that take place at Wall Street affect every individual, this is evident from the depression which impacted not only American’s but individuals worldwide after Wall Street crashed in 1929.
Wall Street has always been viewed as and usually portrayed as an institution for the rich and the corrupt. People who work at Wall Street are usually seen as power-hungry individuals who are filled with greed, this, alongside the fact the average American doesn’t have much knowledge around trading meant that Wall Street always seemed inaccessible to the average American. This all changed after a Reddit thread did their research, came together, and made an investment in Gamestop. The Redditors involved made history as nothing like this had ever been seen before and it showed that the stock market wasn’t just for the rich and privileged but that the average person could make a profit from learning how to trade. As this was such an important moment and has changed the general opinion of trading so much that we think it’s important that people understand the significance of what happened, so keep reading to find out what these Redditors actually did.
Why did Redditors target Gamestop?
This is the first question many people are asking and to understand this there are various basic aspects of trading that you need to understand. In the stock market, there is a concept called a ‘short’. A short is when an investor borrows a share, once they have borrowed this share they sell it straight away. They do this as they hope to buy the share back at a lower price, then they’ll give the share back to where they borrowed it from and have made a profit from initially selling it. This is how it would work ideally but it is a risky way of trading as if the price of the share goes up rather than down, they will still have to repurchase the share as they only borrowed it and still have to return it. The reason that Redditors targeted Gamestop was that this company had a massive amount of shorts taken out against it.
What did the Redditors do?
The Redditors identified that there were so many shorts taken out and all the people on the thread gathered together as much money as they could and bought up as many of the shorts that they could at this lower price. Due to this massive investment the price of the shares skyrocketed, this is known in trading as a short squeeze.
How did this affected hedge funds?
Hedge funds were planning on buying back the shares at a lower price but the Redditors had caused them to massively increase in price, this forced the hedge fund to quickly buy back all the shares they had shorted at this higher price, their investments into Gamestop, in turn, caused the share prices to increase even more. One hedge fund had taken out many stocks on Gamestop, when they were forced to buy back their shares at this higher price they lost all of their money. Prior to this the hedge fund was worth $13.1 billion but was forced to declare bankruptcy after this event. The Redditors explained that they weren’t just doing this to make money but to take back some of the power from Wall Street as they believe that the power and wealth should be redistributed, and now that more people are using findbitcoinatm, hopefully, they’ll start the redistribution themselves and help out their local communities.
Can I get involved and is it legal?
What the Redditors did could at the very worst be classed as market manipulation, but what they did was legal thanks to the concept of the free market. You can also get involved, one of the safest cryptocurrencies to invest in is bitcoin. If you want to be like the Redditors then make an investment and watch it make you a profit.