The flash mob that raised gamestop stock prices and other stocks that were significantly lacking caught Wall Street unprepared. In the cryptocurrency market, such behavior has long been recognized.
Groups of investors who organize on social networks and lock on to a particular asset – usually something small and not liquid enough so that it can be easily influenced – are a hallmark of the crypto world. Although digital currencies have begun to be accepted by professional investors, they are also still subject to inflation programs common on social networks such as Discord and Telegram.
The prevalence of such tactics, which could also be found a decade ago in the early days of the crypto industry, suggests that getting around a gamestop on the WallStreetBets forum in Reddit may not be an isolated event in the stock market. A similar, temporary jump happened last week in the silver bullet market.
“This is definitely the moment when the understanding is ripening among small day traders that there is power in numbers, and that comes from crypto,” said Kane Warwick, founder of Synthetix, a platform dedicated to derivatives of cryptocurrencies. “We realized this a long time ago.”
Another similarity between cryptocurrencies and WallSteetBets: free tools, like trading apps and bulletin boards, that cultivate what Bitcoin has defined as the democratization of trading. Bitcoin was created 12 years ago as a decentralized currency that would be free from the intervention of bankers and other brokers.
When the Robin Hood app restricted trading in certain stocks, investors at WallStreetBets saw this as further evidence of inequality in the investment world, and cast themselves as an uncle in front of the Wall Street establishment they portrayed as Goliath. Following this decision by Robin Hood, Coinbase, one of the largest crypto exchanges in the world, experienced an increase in the number of investors as the people blocked by Robin Hood sought new investment platforms.
“Daily trading is basically playing a game”
There has already been an overlap between crypto traders and traders using Robin Hood. About 46 percent of crypto investors in digital exchanges like Coinbase and Kraken have also made deposits in Robin Hood, according to a survey of consumer spending practices by the company Cardify.ai. Both fans and critics of Robin Hood, which allows investors to trade stocks, options and cryptocurrencies, say the app encourages the stock market to turn into a game by using features like pushes, free stocks and confetti graphics, to encourage increased use.
Niraj Agravel, public relations manager at the Washington-based Crypto Coin Center Trading Group, says there is a big overlap between gamers and crypto traders – and now it seems that they are also trading with stock market traders.
“It’s the same skill set,” he said. “Day trading is basically sitting in a gamers chair with a lot of screens and playing a game.”
The speed of recent gains in Bitcoin and GameStop is already causing such comparisons.
Bitcoin has been in an abnormal rally since September when trading around $ 12,000 per unit. In December and January the rally went into turbo mode. On December 16, the currency first crossed the $ 20,000 threshold per unit, on January 3 it crossed the $ 30,000 mark and after only five days crossed the $ 40,000 threshold.
After being briefly halted, Bitcoin picked up momentum again this week after Tesla revealed it had bought $ 1.5 billion in Bitcoin and said it intended to accept digital currency as a form of payment for its electric vehicles. Bitcoin set a mid-day gift of $ 48,226 per unit on Tuesday.
There are bullies who believe that Bitcoin could reach $ 200,000 by the end of the year, even in the face of skeptics who say the currency has yet to prove itself as a large-scale currency.
The rise of the Gamestop stock was also in turbo mode. At the beginning of the year the stock was at $ 19. By January 19, they had doubled in value. Three days later, they were worth more than three times that – and three days later, on January 27, closed at a high of $ 347.51. During the rise and fall – the stock closed last Tuesday at $ 50.31 – WallStreetBets users encouraged each other to “keep the line”, “send GME to the moon”, and click on the hedge funds that sold gamestop stocks on the other side of the stock market.
The rise of the stock was not related to the fundamental components of the business. Gamestop is expected to report a fourth consecutive year of declining revenue as the company faces years of declining mall traffic and technology that allows people to download game files directly to game consoles instead of buying their hard copy.
Running stocks and inflating currencies
There has been much discussion as to whether the behavior of traders organized in WallStreetBets should be considered stock-trading. The madness surrounding GameStop has caught the attention of the Securities and Exchange Commission (SEC), which has announced it is investigating whether it is a stock run. U.S. Treasury Secretary Janet Yellen, meanwhile, has requested a meeting with senior officials at the SEC, the Federal Reserve, the New York Fed and the Board on Futures Trading to discuss recent stock market volatility.
Conspiracies to inflate the value of cryptocurrencies have been the subject of less scrutiny even while the futures trading council has suggested to conspiracy theorists to run stock prices. Traders associate in groups with names like Big Pump Group or Big Pump Time and focus on a particular currency on a particular stock exchange for a certain period of time in order to push the price up and sell when it is high.
Such groups became very organized by 2014 and peaked in 2017 and 2018. They generated more than $ 825 million in trading activity in 2018 alone, all from small traders across hundreds of groups, according to an analysis by the Wall Street Journal.
In a recent example, a group called United Binance Pushes organized the inflating and abandonment of a remote crypto currency called Bread, which had a market value of about $ 10 million. On Saturday, at one o’clock in the afternoon – a pre-determined and agreed upon time – Bread trading skyrocketed, for a very short time, on the Binance Stock Exchange.
In one hour, the volume of Bread – which is so marginal that the currency is only traded on Bitcoin and a website – rose to 65,000 Bitcoin from 2,000 Bitcoin. In terms of price, it rose to 0.00000473 Bitcoin from 0.00000281, before falling back.
“With many new members we hope it has been a successful inflation and that you have learned a good lesson,” a group in the Discord network dedicated to running the currency later wrote. Bottom of Form