When was the first time you heard about r/WallStreetBets or RobinHood? If you’ve been following financial disruption at all, it was about two years ago, when the “infinite leverage” glitch catapulted the Reddit sub and the app into fame.
The stock trading platform for “the little guys,” the RobinHood app makes it easy for anyone to trade. Not just stocks, but options. And that means that at-home, single-person traders (like Redditors) have the ability to place trades (really, bets) that can get them practically infinite income… and practically infinite losses.
YOLO: The Culture of r/WSB
The denizens of WallStreetBets call themselves “autists.” This isn’t as denigrating as it sounds; it’s praise, to them. While not politically correct, it’s their way of saying that they focus on one thing and only one thing. Sometimes to the detriment of the rest of their life.
And sometimes they’re horribly wrong. But often they’re horribly right. Either way, they disrupt.
r/WSB users focus on “YOLOing” stock. In other words, they place very large positions on things that are essentially gambles. But the beauty and complexity of WSB is that they often aren’t gambles. Usually, the people on r/WSB are trading on news, which are entirely valid ways to trade.
Moreover, r/WSB takes advantage of a cyclical effect. While they aren’t organized (and therefore aren’t illegal per the SEC), they have significant visibility. When someone posts that a stock is “winning” for them, others will fall in line. From r/WSB, it eventually gets into the mainstream media. This all crystallized with GME.
But again, this isn’t anything that anyone else hasn’t been doing for a long time, such as stock reports on the news.
GME: WE LIKE THE STOCK
Tune into r/WSB and you’ll see everyone saying something very simple about GameStop: “We Like The Stock.” This is about more than just defying SEC’s collusion standards.
Way back in the before times of “a couple of weeks ago,” GameStop brought in a couple of executives from Chewy. Investors became bearish on the stock, expecting these executives to turn the retailer around.
This was around when people noticed that GameStop was incredibly over-shorted.
People started investing in GME because they genuinely did “like the stock”; they saw that it was undervalued because of the shorting. Essentially, hedge fund managers were trying to drive GME into bankruptcy by selling over 100 percent of its available stock.
RobinHood: Steal from the Poor, Give to the Rich?
However, the very same company that started the GME surge is the one that ultimately betrayed its own users. At the height of GME hysteria, RobinHood decided to restrict trading, so investors could only sell GME and not buy it. GME plunged to half its value before starting to recover again. And RobinHood wasn’t alone. Many other brokerages restricted trading GME for high volatility.
This is now being investigated, by such high-profile individuals as Alexandria Ocasio-Cortez and Ted Cruz. Essentially, brokerages were able to fix the price, because they only allowed for selling — theoretically to help hedge fund managers.
GME, AMC, BB: To the Moon
GME isn’t the only one that’s being promoted by r/WSB. AMC and BB are other stocks that those on WSB appear to have a consensus about: They think they’re undervalued. AMC was nearly driven to bankruptcy but received a cash infusion, and its problems are likely to be over after COVID. BlackBerry is leaning hard on privacy at a time when privacy is being questioned on almost every frontier. While some believe that these are distractions (the more people invest in AMC and BB, the less they’ll invest in GME), they’ve been on Reddit’s collective mind for a while.
GME was unique because it was so incredibly over shorted. It was over shorted by nearly 150 percent. Comparatively. AMC is over shorted by only about 50 percent (which is still a lot). But a short squeeze actually isn’t critical for market disruption; this was seen with TSLA’s explosive performance over the course of 2020.
What’s Next for r/WSB?
So, r/WSB is moving its money off RobinHood’s mobile app and there are a few new contenders for the crown. While the mobile app Cash App doesn’t allow purchases of GME, it does allow AMC — and it allows for the purchase of fractional shares. Stockpile still allows the purchase of fractions of GME. And other brokerages, like E*Trade and Fidelity, never stopped.
r/WSB is still leaning into GameStop. After all, they like the stock. And now it’s become not just an investment but an ideological mission; a way to say “F-YOU!” to the Wall Street fatcats.
This isn’t illegal. It’s not even strictly frowned upon. r/WSB is just a collection of like-minded people discussing stocks and determining whether they like a stock. They have absolutely no inside knowledge; they only know what is reported from the outside. They then independently decide on whether they want to invest.
This is something that’s baked into the market. But never before has it been so easy for someone to invest directly into the stock market. People today can manage their own retirement accounts, buy their own stocks on their lunch break, and otherwise invest freely — and quickly.
Right now r/WSB is pumping up GME, AMC, BB, and… you probably won’t believe it… Dogecoin, a cryptocurrency based on a Shiba Inu meme. And as crazy as it might sound, there are millionaires being made overnight… and billions being lost… all on a mobile app.
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