WallStreetBets or r/WallStreetBets is a subreddit that has pushed for very aggressive trading strategies in the stock and crypto markets. The WallStreetBets Reddit became popular in recent months as it pushed higher the price of stocks such as GameStop (GME), Nokia (NOKIA), or AMC Entertainment Holdings (AMC).
These stocks were known for being highly shorted assets. Hedge funds have been shorting these assets in order to profit from their price decline. However, the Reddit WallStreetBets group decided to purchase these stocks in order to create a “short squeeze.”
Due to this reason, several brokers such as Robinhood or blocked users from purchasing these stocks. Users could only sell but not purchase more stock. Additionally, a worldwide debate started in order to understand the current situation of the market, including manipulation by hedge funds, large companies and generally Wall Street firms.
A short squeeze is a situation in which a specific asset is pushed higher in the market and forces traders with short positions opened to buy the asset to avoid greater losses.
Basically, when the traders with short positions see the price of the asset they are shorting skyrocket, they purchase it to avoid even larger losses. In this way, the price of the asset moves higher even faster creating a devastating situation for them.
This is what happened to hedge funds that were shorting GME. When r/WallStreetBets started moving the price higher of GME, hedge funds had to stop shorting the market and purchase the stock to avoid losing even more money.
The WallStreetBets Reddit group became known for being a revindication of retail traders against market manipulation from large institutions.
The price of GME reached a high of $347 per stock on January 27. This has helped many investors that purchased the stock below $20 to multiply their investment. At the same time, it generated the short squeeze that we have been talking about.
Nowadays, the Reddit WallStreetBets group has over 8.7 million followers and became one of the largest in the financial world. r/WallStreetBets is now working as a place for memes, financial discussion and market-related topics.
The first attempt for retail traders to purchase stocks and generate a short squeeze has been successful. However, there is no information on which is going to be the next move the Reddit WallStreetBets group does.
As Robinhood and other trading platforms have blocked users from purchasing GME stocks, many of these traders and investors are now holding large bags of GME that they can sell at a massive loss. It is not clear what will happen in the future if another stock experienced the same situation as GME. Nonetheless, it is possible to expect a similar situation as experienced by GameStop traders that couldn’t purchase more stock in several brokers.
There have been several connections between Reddit WallStreetBets (r/WallStreetBets) and the cryptocurrency market. One of the situations that are worth mentioning includes the price of Dogecoin (DOGE) skyrocketing from below $0.01 to over $0.08 in just a matter of hours.
Dogecoin is a meme cryptocurrency that has been in the market for several years now. However, it works just as a meme digital asset and it does not offer major solutions to users.
It is worth taking into consideration that Dogecoin has not only been pushed by WallStreetBets Reddit group but also by Elon Musk, the CEO of Tesla. Mr. Musk has been pushing for a higher DOGE in the last years. He has even written on his Twitter bio that he was the CEO of Dogecoin.
The main question remains if the Reddit WallStreetBets group will push for crypto adoption in the future. This is something we don’t know but we could start thinking about. Bitcoin (BTC) is one of the largest cryptocurrencies in the world and it has been promoted as a decentralized currency that goes against the establishment.
Bitcoin has reached an all-time high in early January 2021 and it could continue growing in the future if more companies enter the market. Bitcoin cannot be controlled by a single authority and it has become a representation of an asset with a limited supply contrasting with the monetary policies from central banks that undermine savings from the population.
Currently Bitcoin and WallStreetBets could be a good combination and a way to expand BTC knowledge to a large number of individuals that still do not know about this digital asset.
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