How bitcoin offers GameStop investors freedom from Wall Street tyranny
- The GameStop frenzy was not about balance sheets and cash flow but rather identity, community, financial agency and demanding a fair and free marketplace
- Bitcoin and the space it represents appeal to a new generation for whom the web signifies agency without borders, and institutional investors are going long
Retail traders were seen as emotional, unsophisticated and, when up against institutional investors, at a structural disadvantage. That is, until they banded together in the thousands and decided to take a stand against Wall Street.
In January, members of Reddit group WallStreetBets, known for their aggressive trading strategies, were able to push up the price of GameStop by more than 8,000 per cent from May 2020.
What mainstream media and financial commentators failed to see was that WallStreetBets was operating on a different set of fundamentals. This was not about balance sheets and cash flow but rather community and financial agency. It was about demanding a fair and free marketplace.
It was also about identity, as expressed in an open letter by one of the WallStreetBets members to Wall Street and CNBC: “I own GameStop not because Diamond Hands. I own GameStop because I AM GameStop. I am choosing to invest in my generation, and selling would be selling myself out.”
What are cryptocurrencies?
While the commotion has subsided somewhat, with GameStop trading around US$50, the story is far from over.
Bitcoin has its roots in retail, and in this instance the institutions are somewhat disadvantaged. Unlike private individuals, institutional investors cannot purchase bitcoin the same way retail investors can. They must do so on platforms that meet regulatory requirements and report their holdings, and funds are usually placed with a third-party custodian.
Additionally, asset management firms in the US are bound by certain volatility restrictions on their portfolio, which means their exposure to bitcoin is usually limited.
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Bitcoin is everything WallStreetBets was looking for in GameStop. It belongs to a new generation of digital natives who value bitcoin for what it brings them in terms of community, financial agency and identity.
Now, it is easy to convert cash to bitcoin online via merchants, on exchanges and soon even via platforms such as PayPal. Bitcoin can be held in private wallets, in mobile apps, in an external storage device, on an exchange to collect interest, in cryptic text on a piece of paper or even simply in one’s memory if one was so daring.
According to a 2019 report by research firm Chainalysis, criminal activity represented 2.1 per cent of all transactions. In 2020, this fell to 0.34 per cent, around US$10 billion.
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Blockchain-powered platforms allow anyone with an internet connection to trade across thousands of cryptocurrencies and tokenised assets without inhibition. Even without the big exchanges we have come to know, many of which have their roots in Hong Kong, decentralised exchanges that exist only in code always make it possible for people to trade on a peer-to-peer basis.
Bitcoin and the space it represents are undeniably appealing to a new generation for whom the web signifies agency and a lack of borders, and institutional investors are going long.
Ben Caselin is head of research and strategy at AAX, the first cryptocurrency exchange to be powered by London Stock Exchange Group’s LSEG Technology