What’s up with GameStop, Reddit & Bitcoin?

There’s a financial war going on. Some peeps on Reddit took smart bets against Wall Street positions, which were severely over leveraged – assuming big companies would fail or shut down during the Pandemic. They realized if they pushed the stock up, the hedge funds would be forced to compete or buy at high prices to minimize losses.

Some of this was revenge against Wall Street hedge funds that have made bad choices, tanked the economy, lost people’s pensions, and still got bailed out by the government and lined their pockets. Some of it was just a risky bet.

The Reddit community in one particular thread call themselves “retards” or “autists” – they acknowledge they are not making sound financial decisions. They’re playing with YOLO (you only live once) money. Which is scary for the hedge funds; every day, the stock goes up, the markets close, then the hedge funds try to tank the stocks by selling positions to scare out the investors, or media outlets give it a negative spin “these idiots are going to lose their money”.

But they’ve also found a lot of support: AOC and Elon Musk and Jon Stewart tweeted about it; it’s kind of a Robin Hood vs. the rich situation. The Bitcoin community, which is generally against banking anyway, are selling Bitcoin to buy these stocks and keep the price high, to put more pressure on the stock markets. So, Bitcoin goes down. Other stocks go down as the hedge funds need to move their cash around. Hedge funds have lost roughly 50 billion dollars.

I don’t think this government will be as likely to bail them out this time; after making dumb, predatory risks and getting played by retail investors (regular people, trading from smart phone apps). Which means some of these big billion dollar hedge funds could lose – if so, a lot of people will take their profits from the banks and go back to Bitcoin, a huge transfer of wealth.

Or, the banks might pull through; some early investors will have made huge gains, but later investors will loose a lot of money. Only *yesterday* did this became mainstream media, so a lot of people are only hearing about these stocks now – and trying to buy in. I think it’ll keep going through Friday at least (Feb. 1st right now; this will probably last weeks).

Should you buy? Probably not.

Some of these stocks were chosen because they’re good, undervalued companies the forum believed it; others have some nostalgic or brand value – this is basically revenge of the nerds, out of loyalty to the movies and video games – but also investing against Wall Streets heavy short positions for a specific reason. It’s not completely random, but it’s also not completely rational. Wall Street expects them to fold under pressure, worried about losses – but these guys don’t care about losses, they are playing the long game and trying to outlast or out pressure Wall Street (and most are fine with losing $ if they can bleed hedge funds dry).

There’s a lot of confusion, as millions of new people jump into the forum to shill other stock buys (which may be a false flag, to get investors to move to other companies that don’t hurt the hedge funds as much). The main Reddit page got shut down for awhile, probably to clear out the amount of bots and trolls; another big forum went down too. Meanwhile, many of the big trading stock apps have stopped allowing its users to buy or trade these speculate stocks.

It’s a mess, but it’s also a big deal. It’s like a digital version of Occupy Wall Street; but there’s even a little bit of connection with the Stop the Steal people (don’t trust rich/big government). I’ve heard some comments about how this movement is where the real Unity is: people against the bankers. When this all plays out, there will probably be significant changes to speculative practices in the stock market.

First it went from about $10 to $100; then (probably) $100 to $1000.

So, if you put in $1000, it would have become $1 million in about a week. Asian traders are getting into it. Celebrities are getting into it. Boomers are moving their safe stocks to this wild “meme stonks”.

Some of them represent real companies with real value. Others are plays betting against severe shorts and will plummet again later. Probably. Nobody really knows. Now that there’s blood in the water, all kinds of groups are getting into the action to stiff the suits and shut them down, like hackers exploiting a terminal weakness. Most people still think it’s some kind of bubble; that the price must go down. But that’s just not how things work anymore. Everyone thought Tesla was bubble and way overvalued; but the community of Tesla stock buyers just really liked the stock, and they kept the acceleration.

There’s enough information out there – even on open platforms like Twitter – that most people understand the basic gist: buy and hold. So, I suspect, people will buy in and see that it keeps going up because no one is selling. Because it keeps going up, more people will keep buying in. When will it stop? When big players pull their money to take profits… and even then it will be slow as people have been told to buy and hold, and most people don’t know what’s going on and will be afraid to sell. Also, a TON of people will be in for low amounts they aren’t too afraid to lose.

The OTHER piece of all this is; free trading apps allowed and encouraged retail investors to start investing with automatic deposits – as low as $5/week. They’ve been doing that for the last few years. They now have thousands of dollars in stocks, and it doesn’t even feel like “real” money – so they’re selling more reasonable positions to ride this wave, and collectively that’s a lot of movement in the stock market

On the 28th, they SHUT down trading, allowing people to sell, but not buy. Then they dump a ton of shares, to push the price WAY down unnaturally, so they could offload stocks and shore up dangerous positions. This of course pissed off the entire world, who were rushing in just to buy more stocks.

Then, they absolutely tanked the price again just at the close, but it was quickly pushed back up in after market trades. Reddit boards are full of pop culture memes from Game of Thrones and Lord of the Rings and The 300.

Robinhood app, the most popular, based on the slogan “let the people trade!” stopped trading and got flooded with 100,000 1-star reviews (which Google then deleted, but keep coming back as more people rage). Interestingly – they used to give out FREE GameStop stock to new users, because it was a super cheap “penny” stock – but some of those users with that one free stock then sold them for up to $500 bucks. One middle schooler made a few grand on a $60 investment.

Young people are angry at being told not to buy iphones, or starbucks, or to try budgeting: when the truth is a minimum wage full-time job is nearly guaranteed to lead to life-time debt and financial insecurity. Unlike the older generations, they are crippled by student debt loans with high interest rates; unaffordable housing; and crowded job markets. They know that *nothing* they do will change this so it’s easy to throw a few hundred bucks (or a few thousand) into a “YOLO” movement like this.

Billionaires are literally crying on TV.

As US markets closed, the ball was handed off to Germany and European investors to hold the line until markets opened again. There’s a huge campaign of disinformation (bots and spam accounts) telling everyone that the #GME and #AMC manipulators are moving over to #doge – a meme based cryptocurrency, which saw an epic spike. I think it’s probably:

1. doge doing a cash grab to catch the fiery passion of the movement
2. hedge fund managers trying to get people to sell GRE and invest in anything else
3. crypto kids driving demand for massive payouts which they can reinvest in GRE to keep adding pressure

Doge is most likely a “pump and dump” scheme where some people will get out and most will lose. But the argument has been made that seeing how deceptive and manipulative the stock market is, all of this will only fuel bitcoin and crypto once all is said and done. People are also using the fervor to push silver or alternative coins or stocks.

Right now most regular stocks are dipping, this is definitely a big shake up. BUT, super large banks also have a significant amount of shares in these stocks, so they’re OK with them going up. Rather than waiting on stimulus checks from the government, retail traders are taking their money back. In the process, they’re exposing manipulative practices and cracks in the system.

I for one am optimistic, it’s super fun to see everybody suddenly excited and energized after several hard months. I think this will give politicians a clear reason to set limits that strengthen the stock market and protect regular people from big banks; and maybe even move towards widely popular but controversial practices like universal healthcare, student debt relief or even universal basic income.

As of right now, February 1st, people are renting billboards, it’s on every news channel, including in foreign countries. It has completely taken the world by storm. I expect more people to dump in over the next week and most to pull out once it leads to profit, which might make a pretty steady rise followed by a slower fall.

But there’s SO many problems with the system, it’s likely to put a lot of big banks into real trouble, so I wouldn’t be surprised with some major big news or shutdowns soon until things settle: the market has never encountered anything like this, but it was inevitable with the growth of social media and easy to use investing apps.

I’m not a financial investor: I’m in it for the memes, but I also like the stock. 🚀💎🙌🚀💎🙌

PS. Pretty sure I heard they’re already working on the movie so just wait for that to come out and you’ll understand everything.

*** Monday Feb. 1st was interesting. Big red sell-offs that redditors claim are stock manipulations (tons of shares sold at once, for the same number, at the same time as a “halt” on trading). Possibility of “naked shorts” which means hedge funds are shorting nonexistent stocks to double their money. Also disbelieving official sources of the # of shorts. Some of it easily sounds like conspiracy theory stuff.

But at the same time, the news was over-reporting (in print and video) that the “reddit army” had switched from GME to silver. There were tons of bots on Twitter posting this too. Even though inside the actual Reddit thread, nobody was promoting silver at all – as the news pointed out, it wasn’t a good idea, though they did really push the jump in silver prices and shill silver ETF’s. The news also heavily reported the planned execution of the stock price (even though it jumped at open, was pushed down, and immediately rose again, the news kept focusing on how “down” it was even when it was actually up).

The common theory is that the hedge funds, who are loaning out and shorting stocks, don’t actually have enough stocks in their possession (because there are too many shares). So they are panicking, and even though they’re still losing tons of money, they’re also spending a ton on major media manipulation to scare out investors. They are willing to do totally illegal things, because the truth will reveal worse illegal things that would lead to jailtime.

But it’s getting difficult to discern what’s really true, and starting to get boring as the stock price is low all day (and we expect another targeted hit right at close – where they halt trading so retailers can’t buy and ONLY sell a ton of shares to drive down the price).

People seem to be losing interest, the narrative is getting mixed, some people in Reddit are being jerks and calling out all the stupid losers who didn’t sell at the peak, and a lot of pure commitment to ideology without any reference of facts. I tried to put in more shares but my investing app didn’t go through all day; I heard others on the same platform say their purchase orders were cancelled.

So, even though lots of people do want to buy, we are being held off the platform completely, so of course the stock is going down. At the same time Robinhood intentionally lets people buy at the same time: 1 share of GME all day, and then suddenly you can buy 20. So they know exactly when people will be buying or selling, and the line will go up or down – and then they can bet appropriately because they are dictating the terms.

My guess is they are very deliberately waging a very effective psychological campaign and very slowly controlling their losses to avoid bigger losses later. They’re smart people. This will probably keep going for a few weeks. A lot of Redditors are holding “forever”. Most likely at some point, they will succeed in getting the price low enough to get out of most of their positions.

In my understanding, the whole point of all this is that hedge fund borrowed shares to loan out, and they have to give them all back. But, if the people who now own them don’t want to sell them, they have to buy them at any price. Redditors will probably lose money (apart from the early ones who did make millions). Or maybe they will make some money. The hedge funds will definitely lose a lot of money. But if they keep controlling the market and placing safe bets by controlling the volume, they can probably earn it all back. It’s illegal, I’m pretty sure, but in the end they’ll probably pay a fine or serve a few years in jail to make billions.

Waiting for my own share purchases to go through, I’m definitely thinking of cancelling my orders as I see the price drop, which is weirdly the only option I have (since it’s stuck and can’t go through, they only let me cancel; and I suspect they’ll end up cancelling automatically instead of going through). The uncertainty is difficult and frustrating, which is probably the point. I’ll keep my initial investment in and wait until my second position goes through (basically doubling down). But at this point I’m not very confident it will go up, and if it does I may sell a little to cover my losses.
💎🙌

UPDATE: I’m now fully part of the cult. After hours trading fell 50%, hugely down. News immediately reporting on how this faz and fizzled and the squeeze has been sqoze. There are articles and “proof” on both sides but a lot of skepticism about what’s real. Is the news reporting the facts or creating the facts? I’ve paid to join a livestream so I can comment and explain what’s really going on like a shill. I still suspect there’s some really weird stuff going on so I’m still in and will ride this out.

*** Tuesday Feb. 2nd. Lots of fearmongering and “loss porn” before markets open; posts about how everybody else is selling, the board has got out of hand and everybody is losing tons of money. Some comments are like “we’ll be LUCKY” if this ever goes up again. Some comparisons about how GME is the new Qanon – irrational and blind to evidence, fueled by questionable deep studies and how the only truth is by some anonymous guy because the fake news won’t cover it and is all in bed with the billionaire cabal. Definitely demotivating. The price has tanked hard. There’s speculation about how the banks are failing to deliver the stocks people are buying, and how they’re manipulating the selloff to drive prices low. My guess is, we could see another day of this, dropping the price below $100. Then when it finally goes up again, everybody will sell, desperate to get out, and it will plummet.

The weirdest thing though, is that, from what I understand looking at official sources, there is still 3x the buy volume than the sell volume. More people buying, but price still going down – add that to the fact that most trading apps are not allowing buys of this stock, including my own (Stash, which simply didn’t trade what I wanted today at all, at least of these meme stocks). Also, a lot of people are reporting automatically stop loss cancellations they didn’t set up: so they buy, the price drops, and they’re booted off at a loss. A lot of this might be to “protect retailers” but that raises its own issues.

*** Wednesday Feb. 3rd.

The hype has died down a lot, most people are holding and waiting to see what happens, but the enthusiasm is gone. It seems like *maybe* some of the trading apps have allowed trading again so people can at least buy if they want, but of course the mad rush has cooled and it doesn’t seem so attractive anymore (although, as I mentioned, the orders I had placed never went through so I shifted my money elsewhere). There’s a feeling of “we’re being robbed but we can’t do anything about it.”

Instead I bought more bitcoin and ethereum, and looked up youtube videos about the “best penny stocks to 100X your money!!!”. You’d think I would have learned not to jump on all the crazes, which is true: however, counterargument, about 10 million new people are checking out apps right now looking for the next big thing, retail investors are definitely a force, and most of them are not going to do their research. So if a few youtubers recommend the same stocks and I know most other casual investors are getting the same information, it’s very likely to go up at least for a while.

One particular pornstar pushed some memestocks and doge coin, sold high, and donated 20K to charity. So we seem to be entering a phase were influencers can make quick money driving their audience, which is basically what TV shills and news personalities have been doing (there was a big run on silver this week as all the news outlets falsely reported the wall street bets group was pushing it. Lots of people who trust their news bought it; of course it immediately crashed afterwards). Another investor who pushed GME hard, finally sold at a 700K loss even though he said he wouldn’t.

This is going to lead a lot of people to be skeptical of their sources of information, but also newly hooked on the fun of investing. I think it’s probably a pretty strong year for stocks anyway, only now MASSIVE numbers of people will be able to directly support companies they believe in by investing responsibly, which has never really been the case before (investing in companies or emerging technologies for their environmental impact rather than the potential of big gains). I think this is a positive move.

Gamestop ended up just under $100 again – it seems like people are still buying and people are still pushing it down: there are still limits with how much people can buy, which is its own problem, but my guess is it’s still heavily shorted. Tanking the price at close means the news can report about how the GME trend is officially dead and not going up again.

*** Thursday, Feb. 4th. Today got weird.
In the middle of the night, Elon Musk tweeted a bunch about $doge coin – the meme/joke coin based on a Shiba Inu dog. He’s done this a few times, but it was like 5 tweets at once, he was doing it hard. Speculations:

1. His rocket just blew up so he got super high and wanted to mess with the world.

2. He felt bad for having previously mentioned $doge, and getting a ton of people joining in the bubble only to be left holding the bags and losing their life savings… so he decided to push it up again to give them a chance to get out.

3. He’s pissed at the SEC for accusing him of manipulating stocks, so he did it with crypto instead because it’s so far not regulated.

4. He’s pissed about all the short-sellers getting rich as Tesla stock plummets after his rocket explosion, and he knows they’re all heavily short stocking the $doge meme also, so he can cost them tons of money just by pumping the coin.

5. He *could* have thrown some money in, and instantly 5x’d it, but I’m not sure how legal this would be. There’s also speculation he’s doing it to drive down bitcoin so he can buy up more (as soon as he tweeted, everyone moved their crypto into $doge and all the other big coins had a sharp decline).

My guess is, probably a combination of all of this things. But seriously, reality is crazy right now. In ten minutes he can message 50 million followers, they’ll shift millions of dollars around, take a bunch of money from shorters and *hopefully* back into the hands of regular people.

It’s pretty insane.

Meanwhile, in the after-hours, there were reports of 2 different movie deals from the story: one of the former founders of the subreddit who had gotten kicked off, tried to regain control, booting out all current mods and taking over to monetize the growing membership. There was a digital coup, followed by an anti-coup.

*** Friday, Feb. 5th.
After the stock tanked all the way down to $50, Robinhood removed limitations on ordering. My guess is, it’ll start going up again, but now the “right” people in wall street and hedge funds have figured out their positions and will bet accordingly, now that they’re sure which direction the price is going. That kind of sucks, because if it grows now, completely tame, the movement isn’t at all what it set out to be, but at least the people who invested might be able to get their money back when it goes higher.

YouTubers have been live streaming all day and building an audience from all the desperate people who still have cash in. All the stocks are down, again… I’m down 80% on my investment, but I made it all back in 2 days thanks to some crypto altcoins that had a huge run.

*** Saturday, Feb. 6th.

Some of my altcoins were up 30% yesterday, so I woke up to $1000 in profit: then that all got wiped out as Bitcoin made a move up and everybody moved their holdings over there. I’ve been learning some cool stuff about reading the charts (I’ll post tips here soon!) but mostly day trading is dangerous and unhealthy, all you should really do is pick the best investments and DCA (dollar cost average) over a long period of time, for example putting in $20 every 2 weeks. I’m feeling fatigued but also that I’ve learned a lot recently and will be less likely to make similar mistakes in the future. I’ll keep updating this if something significant happens, but mostly likely, from next week the stocks will all start to climb again, much more slowly, and will find a low balance. I may cash out when I break even again; more likely I’ll let them ride for a few years and see where I end up.

*** Not financial Advice ***

I thought it might be useful to learn some tricks I gleaned from dozens of hours of YouTube streaming. Here are some example charts. There are lots of spikes, but overall you can see when it’s trending up or down. The way it works, is these things will be in “price discovery mode” each time they break a new ATH (all time high). So if they move up to fast, then they plunge down until the level think they are a good price on… which will push them back up again. Each ATC probably increases the level of the fall back price. You can see near the top of these three, there’s a big spike followed by a big correction. Then it bounces up a little, then down again, as people settle and fear and decide what to do.

But you can also see, at the bottom left, a flat, almost U-shaped curve, before the big spike. This is the “consolidation” and it’s really good to look for. If you see a long flat U, it means fear is slowly lessoning, and confidence is slowly gaining. It’s hard to spot a fall-off and hope it won’t sink lower, but you never really know. However, if you can spot a good wide U shape, that likely means it’s about to shoot up – I’d buy after the middle where it’s been going up slowly and steadily, before the big spike.

Instead, it’s easy to spot a huge spike and get excited and put some money there – but by that time it’s most likely too late, and the stock will fall and correct, losing you money on the way down.

Again, not financial advice, I’m a complete amateur at this trading stuff, but since a lot of new people are starting to invest, with easy to use apps, these tips might really help.

About Derek Murphy

Hey there! I'm a philosophy dropout and book cover designer with a PhD in Literature. After spending a decade as a starving artist, I vowed to create the life of freedom my restless spirit demands. I covet a cabin full of cats, where I can write young adult fantasy novels and do a few editorial critiques to pay for my cake addiction. Sometimes I live in castles. FREE GUIDE: Book Marketing is Dead.