Was last week’s Reddit versus Wall Street stand-off really the “beginning of the end for centralized finance,” as Gemini founder Tyler Winklevoss described it? Or was it just a one-time instance of individuals coming together to right a perceived wrong — with no long-term economic consequences?
As GameStop, a struggling videogame retailer, came under attack by hedge-fund short sellers, a coalition of individuals spearheaded by r/Wallstreetbets, a Reddit forum, jumped in to save GameStop by buying its shares, driving its stock price from $20 to as high as $483 — and doing some real damage to short traders in the... Read the latest cryptocurrency news here https://www.newswireunited.com
Wallstreetbets vs. Wall Street: A prelude to DeFi rupturing onto the scene?
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Was last week’s Reddit versus Wall Street stand-off really the “beginning of the end for centralized finance,” as Gemini founder Tyler Winklevoss described it? Or was it just a one-time instance of individuals coming together to right a perceived wrong — with no long-term economic consequences?
As GameStop, a struggling videogame retailer, came under attack by hedge-fund short sellers, a coalition of individuals spearheaded by r/Wallstreetbets, a Reddit forum, jumped in to save GameStop by buying its shares, driving its stock price from $20 to as high as $483 — and doing some real damage to short traders in the bargain.
But then Robinhood, the insurgents’ trading platform of choice, suspended purchases of GameStop’s GME stock and seven other stocks. The Redditors cried foul, asserting that Robinhood had caved in to the hedge funds and other entrenched Wall Street interests. Robinhood, for its part, explained that it was forced to suspend GME purchases or it would have run out of cash to cover the transactions. However, more than 30 class-action lawsuits were filed against the centralized trading platform — one complaint arguing that the suspension was just what “the [GME-shorting] hedge funds wanted,” and another even declaring that “Robinhood stole from the poor to give to the rich.” Others implied that this sort of chicanery wouldn’t have occurred in a decentralized financial world. Along those lines, Galaxy Digital’s Mike Novogratz called the GME flare-up a “giant endorsement of DEFI,” and one crypto user, who wanted to remain anonymous, told Cointelegraph: “Restricting individuals from buying a selected stock is a form of a centralized control mechanism. In a decentralized trading market, no one would have that power.”
This view wasn’t unanimous, though. Quantum Economics co-founder Mati Greenspan found little to applaud in the crowd-sourced purchasing of GameStop stock: “The narrative that Main Street was finally able to beat Wall Street at its own game is extremely misguided,” as according to him, “there were hedge funds on both sides of this trade.” He went on to add: “It’s hard to see how buying overpriced shares of a company that’s losing money will make the world a better place.”
With that as a backdrop, here’s a deeper dive into what lessons, if any, could be drawn from the r/Wallstreetbets vs. the suits showdown. For instance, if retail investors can now move stock prices, then surely they can move large-cap cryptocurrency prices, no? Is the writing on the wall? “The events around GME and Robinhood were a wakeup call for the broader public,” Alexei Zamyatin, co-founder and CEO at Interlay — a research and development company focusing on blockchain interoperability — told Cointelegraph, adding: “I doubt most people outside of finance/banking were aware that Robinhood’s main customers were hedge funds rather than retail users.” “I’m not entirely sure I agree that the recent GME saga has proven that retail investors can meaningfully coordinate to move stocks in the long run,” George Giaglis, executive director at the Institute for the Future at the University of Nicosia, told Cointelegraph. “I see this more as evidence of late-stage market-topping rather than a new wave of sustainable retail-driven market domination as many commenters would like to portray it,” he added.
Kaj Burchardi, head of BCG Platinion Netherlands — a division of Boston Consulting Group — told Cointelegraph: “In theory, a joint retail crowd can move many assets,” including crypto prices — but of course, that depends on the size of the crowd. The Reddit r/Wallstreetbets forum reportedly mobilized thousands of in...
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