The big minds in traditional finance have been concerned about recent stock market action, fueled by Redditors and a whopping number of retail investors. This week, a Goldman Sachs executive warned that if those brief bruises continue, « the market may snowball ». In addition, Interactive Brokers founder Thomas Peterffy made a similar statement this week, saying that this type of system risk could « theoretically turn off the entire system. »
Wallstreetbets trend could « snowball through the market »
2021 has been an interesting year so far and this week a Reddit forum called r / wallstreetbets sparked a whole new hot topic. Four days ago news.Bitcoin.com reported on the stock market fiasco that started with the brief squeezing of Gamestop (GME) shares. GME stocks weren’t the only stocks to feel the boost, however, as the Wallstreetbets trend (WSB) penetrated a number of other types of stocks.
For example, stocks from the Russell 3000 Index (RUA) were selected, including tickers such as NOK, GOGO, AMCX and FIZZ. The social media craze even invaded the cryptocurrency world, pushing up coins like Dogecoin and XRP as well. It is estimated that short sellers lost « $ 70.87 billion from their short sales, » according to statistics from financial data analytics firm Ortex.
An analysis by Zerohedge shows that Melvin Capital lost a whopping $ 7 billion in the first month of 2021. « Melvin Capital lost 53% in January when Gabe Plotkin (a former SAC portfolio manager) lost over $ 5.3 billion in one month. » Report noted.
The Financial Newsdesk also reported on another WSB trend that took place last week when short squeezers tried to squeeze the silver market. A thread on r / wallstreetbets suggested that the power of the masses could push the price of silver from $ 25 to $ 1,000. Zerohedge has reported on trends that show that Redditors and social media users have managed to generate demand for silver.
« In the 24 hours before the market closed on Friday, SD Bullion sold almost ten times the number of silver ounces we would normally sell in a full weekend, which would open the Sunday market, » said the financial reporter. « In a normal market we can usually find at least one supplier / source willing to sell a few ounces over the weekend if we go over our long position (the number of ounces we expect to sell over the weekend will). »
In addition, Polygon.com employee Owen S. Good reported this week on how the meme-powered stock rally saved AMC Theater from $ 600 million in debt. Meme Lords and Redditors saved this business, not the US federal government, not the bankers. These groups have actively taken AMC to the bathroom. « The theater chain gets an unexpected lifeline when private equity swaps a corporate IOU for shares, » explains the author’s report.
r / wallstreetbets is now the largest hedge fund in the world.
Except that it is completely decentralized and completely democratic.
– Chamath Palihapitiya (@chamath) January 30, 2021
Additionally, the infamous Tyler Durden of Zerohedge wrote about an investor report published by David Kostin, executive of Goldman Sachs. Durden writes that the latest Goldman report warns, « If the short squeeze continues, the entire market could crash. »
« The most shortened stocks are up 98% in the past three months, outperforming the major short shortages in 2000 and 2009, » according to Kostin’s study. « This week has shown that an unsustainable excess in a small portion of the market has the potential to tip a number of dominoes and create greater turbulence, » the Goldman analyst added.
Zerohedge’s Durden said the Goldman Hedge Fund’s VIP list fell 4% this week during the WSB fiasco. « Over the past several years, increased crowding, low turnover, and high concentration have been consistent patterns that have increased the risk that a fund’s liquidation could break the ground, » concluded Goldman’s David Kostin. Durden interpreted Kostin’s final conclusion differently.
Translation: If WSB continues to push the most shortened stocks higher, the entire market could crash.
Interactive Brokers Chairman: « In theory, the entire system can be shut down. »
Goldman Sachs executives aren’t the only financial heavyweights weighing on the stock market craze and the potential repercussions. Interactive Brokers Group Inc. founder and chairman Thomas Peterffy discussed his thoughts on the stock market madness in an interview with Marketwatch financial writer Mark DeCambre.
On Thursday, DeCambre said that Peterffy stated that the short squeeze action could go on for a very long time if it wasn’t stopped. DeCambre also wrote that Peterffy was concerned about the systemic risk and the « potential » of this trend to « ripple » across the market.
« Theoretically, it can turn off the entire system, » emphasized Peterffy in his interview with DeCambre. « There’s no reason why a quick press can’t go on indefinitely, » said Interactive Brokers founder.
I’ll be at @business at 4:20 p.m. ET to talk about Memestocks, Gamestonk, Robinhood, Bitcoin, Dogecoin, Papa Musk, and where are we going from here
should be a « spicy » one
The revolution is being televised
– Meltem Demirors (@Melt_Dem) January 29, 2021
Meanwhile, a number of cryptocurrency enthusiasts have fired the WSB trend as WSB’s virality against Wall Street has seen almost all of the social media conversations in the US Meltem Demirors, the CSO of Coinshares, Europe’s largest 3 billion digital asset manager US dollars, in summary, has The Assets Under Management (AUM) interpreted the recent stock market events that shook the status quo.
“At its core, this week’s events are about freedom of speech, censorship and power. We are experiencing the fastest power surge in human history, ”said Demirors.
« As our lives become increasingly dependent on digital media, » Demirors continued. “Likewise, the ability of powerful entities like governments and corporations to censor our right to freedom of expression, our right to assemble, our right to protest and much more. There’s an unprecedented amount of power to be gained, and we’re seeing a battle for control. It has already played out on the political stage and is now playing out in financial markets, financial media, fintech platforms and social media, ”added the Coinshares CSO.
In addition, cryptocurrency trading platform Bittrex Global announced on January 29 that it was listing token stocks for a number of stocks affected by the WSB trend. The exchange announced that it made the decision because Bittrex « wanted to make sure that retail investors were invested in stocks they might want to trade anytime, any day of the week. »
The crypto exchange also plans to list other mainstream stocks that other financial trading platforms may censor in the future. New token stocks listed on Bittrex Global include Gamestop (GME), AMC Entertainment (AMC), Blackberry (BB), Nokia Corporation (NOK), and Ishares Silver Trust (SLV). However, US residents cannot participate because Bittrex Global is blocking American citizens from visiting the web portal.
« Bittrex is regulated in Liechtenstein and Bermuda and therefore US investors may be barred from trading these securities, but other jurisdictions may be able to trade these securities if interested, » the company explains.
What do you think of the recent Wallstreetbets (WSB) trend and the warning from Goldman and Interactive Brokers executives of systemic risk to the traditional financial system? Let us know what you think on this matter in the comments section below.
Bittrex, Crypto advocates, David Kostin, GameStop, GameStop betting, Gamestop longs, Gamestop stocks, Gamestop shorts, GameStop stocks, GME, interactive brokers, Internet, Marketwatch, Meltem-Demirors, Reddit, Short Squeeze, SubReddit , Subreddit Wall Street Betting, Thomas Peterffy, Tyler Durden, Wall Street Betting, ZeroHedge
Photo credit: Shutterstock, Pixabay, Wiki Commons, Tyler Durden Zerohedge, Goldman Sachs Global Investment Research, Twitter, r / wallstreetbets,
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