{"id":6515,"date":"2021-01-29T23:04:00","date_gmt":"2021-01-29T20:04:00","guid":{"rendered":"https:\/\/alfacash.blog\/?p=6515"},"modified":"2024-02-19T21:52:23","modified_gmt":"2024-02-19T18:52:23","slug":"gamestop-dogecoin-reddit-how-profit-with-mem","status":"publish","type":"post","link":"https:\/\/alfacash.blog\/cs\/2021\/01\/29\/gamestop-dogecoin-reddit-how-profit-with-mem\/","title":{"rendered":"GameStop, Dogecoin a Reddit nebo jak profitovat s memem"},"content":{"rendered":"\n

The stock exchange is a difficult game for most people. There\u2019s a lot of money on it (a ridiculous amount of money, indeed), and big investors profit with the successes … and failures of others. The cryptocurrency world isn\u2019t so far from it, because it works similarly. That\u2019s why now we have the GameStop and Dogecoin cases, boosted by a mere group of individual investors from Reddit.<\/p>\n\n\n\n

\"Dogecoin-Kabosu-meme-coin\"<\/figure><\/div>\n\n\n\n

This is maybe a historical thing in the global economy, so pay attention, because a group of your average teenagers declared war on Wall Street and the unethical practices in the stock market.<\/strong> In the process, they successfully managed to drive the memecoin Dogecoin<\/a> (DOGE) to new and unsuspected heights in no time.<\/p>\n\n\n\n

There\u2019s a doggy fever now, and a lot of (probably young) people are earning from a meme. How could this happen? Let us explain.<\/p>\n\n\n\n

The market works like that, really?<\/strong><\/h2>\n\n\n\n

Again, most people don\u2019t know how exactly the economy (and the stock market) works. There are rules and regulations<\/a>, of course, but everything comes down in the end to the supply and demand. They might sound like something complicated but isn\u2019t.<\/p>\n\n\n\n

To sum it up: if something is easy, cheap, and quick to produce and distribute in large quantities (to supply), the need of the people for that product (the demand) isn\u2019t that high, so, the price isn\u2019t high either. It\u2019s a cheap thing because the supply exceeds the demand. On the contrary, if that thing is difficult to produce and distribute, and the people really want it, then the price is higher. Because the demand exceeds the supply.<\/p>\n\n\n\n

In the wild territory of stock exchanges, that could change. Mainly<\/strong>, because the stocks are the symbolical pieces of a company<\/strong>, so, they\u2019re not physical, and calculate its real value isn\u2019t an accurate process. Their prices usually go up when there\u2019s good news<\/a> for the company involved (a new product, release, partnership, etc.). And they go down when bad things happen to the company involved (low sales, scandals, product failures, etc.).<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

However, sometimes, the supply and demand might not be influenced just for the good or bad news. Sometimes, the people around decides to buy or sell just because they want to from the bottom of their hearts and whims. Sometimes, that buying or selling event joins to many others, so, a lot of money is moving around.<\/p>\n\n\n\n

The thing is, when people sell something a lot, that product becomes less valuable. When they buy it a lot, is the opposite. The price can go up and up without control, the more they buy the thing.<\/strong> And that\u2019s exactly what\u2019s happening with GameStop and Dogecoin now.<\/p>\n\n\n\n

About GameStop and Short Selling<\/strong><\/h2>\n\n\n\n

Wait, wait a second. Are GameStop and Dogecoin that difficult to produce or distribute? There is some good news about them? Why the people have jumped into a shopping fever<\/a> suddenly? Because the supply and demand have logical reasons, right? Well\u2026 no. Not always.<\/p>\n\n\n\n

Let\u2019s see. GameStop (GME) is an American company that sells videogames and related products, physically<\/strong>. With the rise of online game platforms (Xbox, PlayStation, Steam, etc.) and the COVID-19 pandemic<\/a>, they didn\u2019t bear very well. They\u2019ve been suffering millionaire financial losses and they\u2019ve closed thousands of its stores worldwide.<\/p>\n\n\n\n

That\u2019s why, in the stock exchanges, the bigger investors (which mean investment companies) have been betting for its failure and making profits with such bets. How\u2019s that? There is a shady strategy in the markets dubbed \u201cShort Selling<\/a>\u201d.<\/p>\n\n\n\n

\"Dogecoin-Reddit-short-selling\"
Image by Gerd Altmann from Pixabay<\/figcaption><\/figure><\/div>\n\n\n\n

Imagine you\u2019re a really big investment company that knows (or expect) that the price of a certain stock (like GME) just go down with time. So, you make a loan to buy these stocks at, let\u2019s say, $17.25 per unit in date #1. You acquire this way 40 million stocks, for example. So, you\u2019re putting there $690m (loaned).<\/p>\n\n\n\n

Why the hell? Because you sell the borrowed stocks right away at that initial price ($17.25) and expect that in the future date #2 the price isn\u2019t $17.25, but, maybe, $6 per stock. Then, you can re-purchase the stocks cheaper to pay your loan with less money and keep the difference for yourself.<\/strong> You\u2019d be returning the same 40 million of stocks; not at $17.25, but $6. In conclusion, you\u2019d be earning $450m in few days.<\/p>\n\n\n\n

That\u2019s Short Selling and yes, it could go horribly wrong as well. If the price of the stock doesn\u2019t decrease, but increase between date #1 and date #2.<\/p>\n\n\n\n

A matter of principles<\/strong><\/h2>\n\n\n\n

A good number of investment funds were betting on the GameStop failure this month. They borrowed (and sold) the stocks at the beginning of January, and were expecting them to decrease by the end to make profits of it. And they got highly disappointed (and alarmed) when the stocks didn\u2019t decrease but skyrocketed out of a sudden.<\/strong><\/p>\n\n\n\n

From $17.25 (yes, real price of GME<\/a> by January 1), these stocks reached $325+ per unit so far. That means a 1,784%+ increase. And that also means, if you took a loan at the beginning of January for 40 million of stocks and sold them for a total of $690m, you\u2019re in problems, because now your debt isn\u2019t even $690m, but $13b. You have to pay an extra of $12.3b. Yikes.<\/p>\n\n\n\n

Investment funds like Melvin Capital<\/a> and Citron Research suffered millionaire losses. And why? Because of a group of Redditors from the subreddit WallStreetBets (WSB).<\/a> They literally plotted to buy GME stocks massively to pump its price<\/a> and, more than likely, sabotage on purpose the bigger hedge funds.<\/p>\n\n\n\n

\"Dogecoin-Reddit-stocks-profit\"<\/figure><\/div>\n\n\n\n

The reasons for this would be, more than looking for profits, sheer revenge<\/strong>. The bigger hedge funds are widely blamed<\/a> for the financial crisis in 2008 because they caused an awful mortgage bubble that left homeless millions of people. Nobody really paid for it<\/a> so far, and these Redditors seem to try to make amends with it.<\/p>\n\n\n\n

The user \u201cssauronn\u201d explained it with an open letter<\/a>.<\/p>\n\n\n\n

\u201cTo Melvin Capital: you stand for everything that I hated during that time [the crisis]. You’re a firm that makes money off of exploiting a company and manipulating markets and media to your advantage. Your continued existence is a sharp reminder that the ones in charge of so much hardship during the ’08 crisis were not punished (…) You can get every mainstream media outlet to demonize us, I don’t care. I’m making this as painful as I can for you\u201d.<\/p><\/blockquote>\n\n\n\n

They\u2019re not alone by now, by the way. Other groups in and out of Reddit, and even celebrities, have joined the \u201cparty\u201d, as they funnily announced on Twitter.<\/p>\n\n\n\n

\n

We're in the Endgame now.

Courtesy of \/u\/IDoLikeMyShishkebabs pic.twitter.com\/kWoOcqfgRr<\/a><\/p>— wallstreetbets mod (@wsbmod) January 29, 2021<\/a><\/blockquote>