The Power of Communities: Reddit

Welcome back to my weekly blog fellas. I am so hyped up cause the topic of today is astonishingly crazy! What do you think Reddit and GameStop have in common? Technically nothing. Actually they are correlated somehow and you will find out why below 😳

The rise of GameStop

GameStop (NYSE:GME) is the word of the week on Wall Street, cause stock price is popping far beyond what most people think it’s worth, skyrocketing over 333% in the past month. Crazy, right? You know what’s even crazier? GameStop was about to go bankrupt. Like most stores still selling products in person, it was hit hard by covid19 outbreak. It’s still in business, but few people expect it to grow again.

By the way, $GME is the most shorted stock in Wall Street by investors. Keep that in mind, cause you’ll need that information later on.

Let’s take a step back though and try to explain what is happening, why GameStop stock rose although the company is facing financial problems and why the price has been influenced by a social network: Reddit!

Btw, if even Elon Musk twitted about it, it’s definitely worth writing a blog post about it 🤓

What is Reddit?

Reddit is a social news aggregation, web content rating, and discussion website. Registered members submit content to the site such as links, text posts, and images, which are then voted up or down by other members. Posts are organized by subject into user-created boards called “communities” or “subreddits”, which cover a variety of topics: news, politics, science, movies, video games and so on.
Alright, you must be wondering why the heck Reddit is involved in GameStop stock price.

WallStreetBet is the answer. (r/wallstreetbetsis) is a community on Reddit with 3M subscribers, where amateur investors exchange opinions, post memes, talk about stocks and… apparently can make a proper short squeeze happen in a matter of days 🤯 Yes exactly, they have decided in a forum to start buying $GME to push the price up, causing the so-called short squeeze.

So, what’s a short squeeze?

A short squeeze occurs when a stock or other asset jumps sharply higher, forcing traders who had bet that its price would fall, to buy it in order to forestall even greater losses. Everything clear now?

What’s the reason behind all of this?

Reddit is challenging Wall Street. Specifically, it is going after the big hedge funds who have been betting against GameStop for months. According to Wall Street Journal, short-sellers have lost $5Bn on $GME! 5 billion. F-I-V-E B-I-L-L-I-O-N. Because of a bunch of people decided so in a forum discussion.

The biggest investment management firms were affected. For example, Melvin Capital, controlling $12.5 billion in assets under management, suffered heavy losses during the GameStop saga, causing Citadel and Point72 to inject $2.75 billion to offset them. I wouldn’t want to be the CEO today.

THAT’S INSANE! 🤯

It ain’t over yet. Apparently, next target is Silver. As you can see below, they want to bring $SLV to the moon, driving the price from $25 up to $1,000 😂 These guys are bold, I’m going to grab some popcorns and watch. I am quite sure that the SEC will come up with something to stop it. In the meantime, we’ll just enjoy the show 🤪

Zoom out: communities make things happen

What just occurred is insane. I mean, this can easily be the subject of the next big Hollywood movie: “The Wolf of WallStreetBets”………. ok that joke was probably not amusing.

However, it made me think a lot. This is another proof of how powerful communities are. Especially Internet communities. A bunch of people sharing the same interests deciding altogether to go all the way towards a direction. Unfortunately, I believe we are still using them erroneously. When we will start leveraging them to address real-life problems, the world will turn into a better place.

“Community is about helping people feel connected and aligned. When people are connected, they feel warm and good, and part of something bigger than themselves. When people are aligned, each of their individual efforts adds to the whole overall effort, so you have a lot of leverage”.

Alright, thanks for sticking through guys, hope you enjoyed it. If you did, share this post on LinkedIn, Instagram or Facebook. You can also leave a comment and sign up to the weekly newsletter. If you did not like it, let me know and gimme some tipssss! See ya 👋👋👋👋