CoinMarketCap, a cryptocurrency market data resource from Binance, appears to be trolling Wall Street.
After a series of bizarre events in the traditional financial world this week involving Reddit, GameStop and the international stock markets, CoinMarketCap added a row of data for ‘WallStreetBets’ and added a disclaimer: “Please note this is a joke and no such asset exists. If you see projects with similar names, please do the necessary due diligence. “
Indeed, this week’s bizarre events have raised a number of important questions for regulators and trading platforms alike. For example, Robinhood finally decided to stop trading and buying certain stocks (if you haven’t heard about them, we’ll get into that a little later.)
This week’s bizarre events seem to have been positive for the crypto markets (at least in the short term): The crypto markets increased the total market capitalization of the sector by $ 140 billion overnight, again surpassing the $ 1 trillion mark.
Additionally, as the CoinMarketCap joke seems to show, cryptocurrency investors and platforms may see a certain amount of hypocrisy when it comes to how crypto markets are perceived compared to traditional markets.
Indeed, cryptocurrencies are often referred to as easily manipulable, highly volatile markets with little or no protective measures against pump-and-dump systems and other types of market manipulation. While that may be a certain truth, this week’s events could point to another nasty truth: traditional markets couldn’t be better.
People said Bitcoin was a scam for a decade.
Now they find out that they had all their money parked in fraud.
– Jameson Lopp (@lopp) January 29, 2021
The epic rise of the “meme stocks”
Here’s what happened this week.
Online commission-free brokerage Robinhood, which has become a favorite among millennial traders since its launch in 2013, has had to stop trading a number of stocks. The stocks Robinhood targeted included GameStop and AMC: so-called meme stocks that were (seriously) adopted by a rogue community of Reddit traders.
What happened? Traders from Reddit’s r / WallStreetBets group and a similar Discord group decided to put large sums of money in GameStop Corp. (NYSE: GME) to pump. GameStop, which has been in trouble for a few years, has been the target of many Wall Street short sellers. Realizing this, the merchants of the r / WallStreetBets group decided to squeeze the institutional giants who had bet that GameStop would keep falling.
If you think a group of Reddit traders couldn’t have a huge impact on GameStop stock price, you are wrong. What appears to be a large number of the group’s two million users jumped into the program, kept buying the stock, and gradually increasing its price within a few days. The price of Gamestop shares rose to 1,700%. At press time, the price rose 1162.42% in seven days (thanks, CoinMarketCap.)
Nice to have all these new followers. Can we just check that you know you are following the worldwide Robin Hood Society in Nottingham and not the Robin Hood App? If so, welcome from Sherwood
– Robin Hood (@robinhood) January 28, 2021
The higher the price went, the more the investors who cut the price had to buy to cover their losses. Wired reported that the resulting effect “turned a snowball into an avalanche,” suggesting that some institutional traders may have taken sides against Reddit traders as well.
But eventually Robinhood pulled the plug (a practice some memesters have described as ironic, and which came from a platform named after a folk hero who steals from the rich to give to the poor.)
The company stopped buying and trading these “meme stocks” and continued to allow its users to sell the stocks, most of which are still among the most popular on the platform. However there Wired reported: “Otherwise? No dice. “Robinhood has since sent a message to its users stating the move was temporary:” We have temporarily restricted purchases of certain securities this morning, “the message reads. The company also posted one Blog post about the events of the week.
“Starting tomorrow, we plan to allow limited purchases of these securities. We will continue to monitor the situation and make adjustments if necessary. “
While the move was drastic, a number of legal experts say Robinhood’s quick and tough decisions were within the company’s legal jurisdiction. In fact, some analysts have even said it could be that traders in the r / WallStreetBets group could be the target of legal market manipulation investigations.
Reddit traders “make no effort to hide their apparent intent to manipulate stock price”
Indeed, the events surrounding the GameStop stock pump have had a number of implications for other trading platforms as well as the regulators who oversee them.
Daniel Hawke, former head of market abuse department for the Securities and Exchange Commission and current partner at Arnold & Porter Kaye Scholer LLP, told the Wall Street Journal that: “When they all encourage each other to use a social media platform, they are effectively involved in a crowdsourced pump-and-dump program.”
They “are making no effort to hide their apparent intention to manipulate the price of the stock,” he said.
In addition, Nasdaq chief executive, Adena Friedman said on Wednesday CNBC that the Nasdaq will make the decision to stop trading if it sees correlations between social media chatters and an astronomical rise in its share price.
This is unacceptable.
We need to know more now about @ RobinhoodApp’s decision to prevent retail investors from buying stocks while hedge funds are free to trade the stocks at their own discretion.
As a member of the Financial Services Cmte, I would support a hearing if necessary. https://t.co/4Qyrolgzyt
– Alexandria Ocasio-Cortez (@AOC) January 28, 2021
FP Markets launches intuitive and feature-rich app for mobile article trading >>
At the same time, however, some lawmakers are questioning whether trading platforms have the right to prevent retailers from taking certain actions on their exchanges at will: Representative Alexandria Occasio-Cortez (D-NY) wrote on Twitter that Robinhood had taken action “Unacceptable “a sentiment that Senator Ted Cruz (R-TX) tweeted that he was” totally in agreement “[d]With.
“We need to know more now about @ RobinhoodApp’s decision to prevent retail investors from buying stocks while hedge funds are free to trade the stocks at their own discretion,” wrote Ms. Ocasio-Cortez. “As a member of the Financial Services Cmte, I would support a hearing if necessary.”
The sentiment expressed by Ms. Ocasio-Cortez and represented by Senator Cruz seems to be the opinion of r / WallStreetBets dealers who have attended events. A Twitter account for the self-proclaimed chairman of Wall Street Bets (WSB) (who incidentally claims to be “NOT AFFILIATED TO R / WSB”) recently tweeted: “The government official who stands up for people and is investigating whether Robinhood will have our support. “Some Robinhood users filed lawsuits against the company after the trade ban.
The government official who stands up for the people and investigates Robinhood will have our support.
– WSB Chair (@WSBChairman) January 28, 2021
While trading platforms and regulators are in turmoil over the events surrounding GameStop’s trip to the moon this week, conversation between retailers has also been affected. Perhaps frustrated by the institutional response to the GameStop gambit, retail investors seem to have turned their attention away from the retail markets and towards … (drum roll please) …
“Would anyone like to try to start a Dogecoin rally with all of this ??????”
…. Cryptocurrency. And in particular DogeCoin (DOGE), a cryptocurrency created as a joke in 2013.
Crypto markets, which are still not as regulated as traditional markets, may be an easier target for groups of traders who want to pump assets unhindered by pesky regulators and trading platform executives.
Indeed, referring to the New York Post: “Thanks to the new power of private investors in Internet message boards, even a cryptocurrency is rising in the truest sense of the word.” According to the post, one Reddit user wrote, “With all this going on, does anyone want to try and start a Dogecoin rally? It’s really cheap and not that difficult to do. “
Wall Street will be shocked to find out that there is no switch off switch for crypto.
– Muneeb (@muneeb) January 28, 2021
And apparently the investors pulled the bait and made it happen. At press time, the price of DogeCoin has increased more than 320 percent in the past 24 hours, from $ 0.011 to $ 0.046. At one point, the price was as high as $ 0.077.
I’m sorry I missed your call. I was busy exposing Wall Street and watching Dogecoin Moon.
– WSB Chair (@WSBChairman) January 29, 2021
However, traders haven’t just put their money into DogeCoin. Forbes reported yesterday that “the cryptocurrency market is adding today as a whole[ed] A value of $ 100 billion will come back within reach of $ 1 trillion. “Today, the $ 1 trillion milestone is in the rearview mirror: At press time, Crypto’s total market cap was $ 1.07 trillion after adding around $ 140 billion overnight.
“Robinhood doesn’t let users buy $ GME $ AMC or $ NOK, but they let them buy Dogecoin.”
It’s also important to note that many Dogecoin buyers didn’t have to switch platforms to buy their DOGE: as Frank Chapparo, Director of News at The block on Twitter: “Robinhood doesn’t let users buy $ GME $ AMC or $ NOK, but they let them buy Dogecoin. Let that sink in for a second.”
“Obviously this means Long Doge,” he added.
Robinhood doesn’t let users buy $ GME $ AMC or $ NOK, but they let them buy Dogecoin. Let that take effect for a second.
– Frank Chaparro (@fintechfrank) January 28, 2021
This seems to be the stance many Reddit merchants take. While DogeCoin is dropping from its 24-hour peak, the hype surrounding DOGE doesn’t seem to be over for a long time. Since the DogeCoin rally seems almost entirely to have emerged from the hype, DOGE is likely not a “safe” bet for an investor.
However fearless it may be, some DogeCoin investors have their eyes on the sky. A user on the r / DogeCoin subreddit posted a post titled “32K – Wall Street Bets taught us that if we trust each other and act as partners, we can move mountains!” At the time of going to press, Swiss Post had over 7,000 positive votes.
The user, who operates under the name u / stalwart, wrote: “[…] I think it’s important that we trust each other. We are partners. I do not give financial advice. I say it as it is. We are “MEMBERS” … LET US STAND TOGETHER. We can do this. We can make history. This week was like nothing anyone has ever seen. But we have power here. “
32K – Wall Street betting taught us that we can move mountains if we trust each other and act as partners !! by r / dogecoin
At the time of going to press, the price for DOGE appeared to be correcting itself due to the short-term pump that took the price to new highs. While DOGE was still up around 250% in 24 hours, the price had fallen around 50% from its 24-hour high and appeared to be moving further down.
Crypto markets See green across the board
DogeCoin isn’t the only asset that appears to have been augmented by this week’s bizarre market events. At press time, Bitcoin was showing a strong rebound from its decline to $ 30,000 with a price level of around $ 36,000. Ethereum (ETH) sat comfortably at $ 1,360; All but two of the ten largest cryptocurrencies by market capitalization showed positive net movement in the past 24 hours.
In any case, this story is far from over. Drop by Finance Magnates to see what happens next.
Finance Magnates reached out to CoinMarketCap to discuss more of the intentions behind WallStreetBets’ “joke” list but didn’t listen back until the press conference. Comments will be added as they come in. None of the materials contained in this article constitute investment advice.