How WallStreetBets affect different industries
The cryptocurrency market is unpredictable, existing by its own rules and regulations for a long time. Big Players controlling the market to benefit from it is a typical occurrence in both the stock and cryptocurrency markets. At the beginning of 2021, the U.S. stock market, the most popular among investors from all over the world, has undergone some key transformations. As there is no central authority controlling the crypto market, WallStreetBets can impose fundamental changes. This article will tell you what the WallStreetBets community is, how it manipulates the market, and how it affects different industries.
So what is WallStreetBets? WSB is a stock trading community on the brokerage platform Reddit, with several million members. Also, the majority of them are young amateur investors. Jaime Rogozinski founded the subreddit in 2012 as a place for experienced investors to exchange ideas on short-term, high-risk strategies with quick and large returns. Nowadays, users express their opinions about trading and investing ideas, share tips and strategies on Wallstreetbets’ Reddit channel. Moreover, often they occasionally discover and exploit critical flaws in Wall Street or financial products. Since it is a Reddit community, it has the typical Reddit-house style, which frequently contains profanity, irony, and a heavy dosage of memes.
WallStreetBets is well-known for its aggressive trading strategies, which generally involve short-term speculations with securities and assets. Ordinary folks, young traders, and investors who trade and speculate, ignoring basic financial principles and risk management measures, are members of this Reddit site. Many compare their activity in the market to gambling. Also, the purpose of this community is to oppose the current financial system and hedge funds, in particular.
We should realize that WallStreetBets is not an organized group with a leader, but the community can sometimes reach an agreement when convincing reasons are presented. When this occurs in the context of lower market-cap stocks, the consequences might be unpredictable. We are going to highlight the most publicized market cases provoked by WallStreetBets.
Users on Reddit decided to teach hedge funds a lesson by launching shares of the dying GameStop computer retail chain into space. With their combined efforts, the WallStreetBets members were able to increase the value of GME by 20 times — these actions nearly led to the bankruptcy of one of the largest hedge funds, Melvin Capital, which had previously bet on GameStop stock decline
The market had hardly recovered from Reddit users’ attack on hedge funds when community members determined that the silver price was being manipulated by huge corporations and acted on the GameStop scenario. As a result, silver stocks increased by more than 11%, surpassing $30 per ounce for the first time since 2013. Therefore, the purpose of the Reddit traders was to create a short-squeeze situation that would impact the large corporations, speculating on silver stocks plummeting.
Moreover, WallStreetBets also contributed and supported the crypto industry when the XRP token’s value increased by 50% on January 31, 2021. The cause for this was a message on the Reddit site, in which retail investors were offered to assist the initiative against the SEC.
WallStreetBets was also involved in the Dogecoin bump on April 18, 2021. With his tweets, WSB Chairman has taken to causing surges in the cryptocurrency market and people hurried to purchase DOGE. At the time, the token’s value increased by 53% in a single day and ranked 7th on the list of cryptocurrencies! Then, Elon Musk supported the initiative and published several tweets about Dogecoin, which prompted the token’s value.
However, it is important to realize that the impact of WallStreetBets on stock and asset markets is transient. In most circumstances, stock and asset values will gradually revert to their original value once investors from the subreddit and the community lost interest in the flash mob. On the other hand, even a brief increase in value and attention might provide a company with a second opportunity to start again.
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Valentina BEREZA, Team bit4you
