The GameStop story is one that will go down in history. A bunch of Reddit investors went up against billion dollar hedge funds. GameStop has kept its head above water and now it is adopting Shib coin and Doge coin for its operations.
How it all went down
In January of this year, r/wallstreetbets, a group of retail investors on Reddit noticed that billion dollar hedge funds were shorting GameStop stock. Over the last few years, the price of the stock had been falling. Many hedge funds, Melvin Capital in particular, were short selling the stock.
Just to give you a little fresher about a few key terms here, let’s go over short selling and hedge funds.
Short selling is a strategic trade that an investor makes by profiting off the price of a stock that is falling. The investor borrows the stock and sells it immediately at its current price. From thereon, they have to return the stock they sold, so they buy it back at a later date when the price has fallen further. As they are gambling on the stock price falling, they make a profit between the difference of the 2 prices.
Moving on to hedge funds, they are companies that hold large pools of money from thousands of dollars all the way up to billions. As they have deep pockets, they have the bandwidth to invest aggressively and take on complex strategies.
Coming back to the story, Reddit users had their eye on Melvin Capital. They took it on themselves to start pumping GameStop (GME) so that the hedge funds would lose billions on their short call. The users single handedly raised the price up by 1700%.
Massive Backlash faced by RobinHood
After the hedge funds lost a crippling amount of money, Wall Street immediately demanded that short selling be made illegal. Top trading app Robinhood stopped the purchase of GME on their platform. This caused a major revolt as it is standing in the way of a free market. They were accused of market manipulation and protecting hedge funds rather than being an unbiased stock exchange.
Wake up call
This was a major wake up call for retail investors seeing how exchanges are stopping them from making large gains. This is why a lot of investors prefer the concept of decentralisation, where it truly is one for all.
How is GameStop doing today?
The price has come down from its high of $480 in January to $155 today. The team behind GameStop is actively making efforts to make a turnaround and deliver for its loyal supporters.
It is attempting to capitalise on the latest technologies like Web 3.0 and NFTs. This week they announced some exciting news for investors that reassured the company’s success. They announced that Shiba Inu and Doge coin will be supported by GameStop.
Flexa, a crypto payments app, is partnering up with Gamestop to enable customers to pay using crypto at their store locations. Customers can also pay with Bitcoin and Litecoin in addition to Shib and Doge. This has been a major victory for both GME investors as well as crypto investors.