These last months we witnessed a historical fight between a group of independent traders and powerful hedge funds on the battlefield of the stock market over the $GME (Gamestop) stock. So far it is believed that those hedge funds have lost tens of billions of dollars because of this, and while many of the independent traders have lost millions, it seems like the odds are in favor of the people.
It all started on a relatively medium-sized subreddit called r/WallStreetBets where traders unite to basically throw away their money in ridiculous bets on the stock market. I quote one of the members:
“Hey you remember me? I am the guy who lost 7 million dollars in a bet last February”
So, how did a small group of fairly crazy internet traders, well known for losing money, mind you, impact the stock market in such a spectacular way? Well, I made my own investigation into this battle worthy of the story of David and Goliath.
I had already heard about the r/wallstreetbets subreddit before the recent events, it was mainly known for its very unique community (by unique I mean that they were known to be a rough and relatively impolite group of people). A common tradition is to insult new members for lacking knowledge of the stock market or for members to call each other slurs as a sign of respect. So clearly it did not seem like a place where people could pull off something like they did. An essential rule of the community is “no politics” which is vital in understanding the reasons behind the Gamestop frenzy. Many people compare this story to modern Robin Hoods or to some sort of class warfare against the rich hedge funds that use the speculative nature of the stock market to win a lot of money. However, once you spend some time on their subreddit you start to understand the true reason behind their action: memes and fun. But even if the original reason behind this movement is not political, many more extreme members of the subreddit made it so, and, well, it worked somewhat. Millions of people worldwide joined the movement of buying $GME to inflict a crushing blow to the hedge funds.
It is also important to understand just how it works. I will greatly oversimplify the concept, so do not think I am an expert on this. Here is a quick summary of what a hedge fund is: A company that specializes in making money using the money that their clients give them, their clients entrust them with a certain amount of money and the fund has to make it increase by a certain percentage each month or year. They mostly use the stock market for that. What those hedge funds did that sparked this event was something called “shorting a stock”. It is basically a method used to make large amounts of money on the back of a dying company for little to no cost. What the hedge funds do is they “borrow” stocks from a company that they know will lose value, they sell them, wait for the company’s value to crash, and then they buy the same amount of stocks they borrowed and give them back to the company, therefore they return the same number of shares but with a lot less value.
r/WallStreetBets had noticed this was happening with Gamestop, a company that many Redditors consider an important part of their childhood, they then decided to lead a movement to stop the short from being successful for the hedge funds. They waited for them to “borrow” their shares and then invested an insane amount of money into $GME. And by the magic of the market, the value of Gamestop flew from only about $20 per share to over $340 per share. That made the hedge funds panic, and in an attempt to limit the movement they pressured many trading applications to limit the amount of $GME shares that people could buy. This is proof that the ordinary people that put in their entire fortunes into an effort to fight against the extreme capitalist hedge funds had an impact, even if the initial spark wasn’t exactly political.
Whilst we don’t see the long-term effects of this event yet, we can be sure that it will act as an example of when a small group of people can spark a worldwide uprising to fight against increasing inequalities and the faults in our modern capitalist systems. This proves once again that the ability to change the world is not restricted to the powerful people, but that even the lower classes can make their voices heard. It is a crucial lesson for our future. We are headed into the 20s of the 21st Century, a decade that will bring great changes and great progress for our civilization, changes that will determine the fate of humankind for the rest of the century. It is therefore vital for us to understand that the ability to make a change and to do what is right is not exclusive to those who hold the power or the money. The $GME events must be remembered as an act of protest against extreme capitalism, and proof that our voice can be heard, even from the confines of the internet to the tallest skyscrapers of Wall Street.