How Reddit Traders Are Pushing the Prices of Tradable Assets
The internet is one of the most powerful platforms in the world, if not the most powerful.
A single tweet can cause an uproar, uniting thousands or dividing millions.
Reddit traders have made full use of the platform (Reddit) in recent weeks to drive up the value of several tradable assets including stocks like GameStop, Blockbuster, Blackberry and AMC Entertainment, the cryptocurrency Dogecoin and precious metals like gold and silver.
How exactly did a group of novice traders cause this market mayhem, effectively bringing Wall Street to its knees?
Read on to find out!
Joining hands on Reddit
Reddit has long been known as “the front page of the internet”, as it calls itself.
From sharing memes, to posting the latest news, to acting as a social media platform, to hosting heated discussions, to driving Wall Street insane with a collective and quite relentless stock and options buying spree – Reddit is home to it all.
The subreddit ‘r/WallStreetBets’ is largely responsible for this chaos.
With over 8.1 million members at the time of writing, 356,000 of which claim to be ‘Buying FDs’ at this very instant, such has been the fervor of its members that Wall Street investors have lost over $20 billion in mark-to-market losses already.
Online brokerages like Robinhood and Interactive Brokers have been at the heart of this outrage.
The members of this subreddit encouraged others to join in the buying spree, leading to the stock price of GameStop rising from $18 in early January to $347.51 on the 27th of January.
These traders bought GameStop stocks in mass in the quest to push out short-sellers by in turn holding bearish positions. One Reddit user turned an initial investment of $53,566 into $11.1 million in GameStop call options!
Subreddits like ‘r/CryptoCurrency’ and ‘r/SatoshiStreetBets’ have been used to call on members to help raise the price of Dogecoin to $1. Assets like gold and silver have experienced significant surges as well.
Conclusion – what does this mean for Wall Street in the long run?
The real question is whether this ‘movement’ of sorts can affect assets of all kinds in the long run.
If millions of traders insist on buying stocks and options in limited time frames in order to boost their price significantly before selling them for a profit, Wall Street could face redundancy.
Reddit traders could target stocks that hedge funds bet against in order to raise their price – if such stocks rise in value, hedge funds lose that value – this could lead to mass drainage.
Online brokerages must regulate such activity and temporarily halt trading on such stocks if they see a continuing trend – this will give institutional investors time to recover.
Meanwhile, Reddit traders can reap huge gains from such activity. It is to be seen whether this trend can target cryptocurrencies like Bitcoin.
If this trend does indeed move on to Bitcoin, Bitcoin’s price could reach astronomical numbers in 2021. Keep an eye on the subreddit and its activity in order to be on the right side of this trend!