Be it resolved, the GameStop frenzy is good for investors and good for financial markets.
By now most people are familiar with the GameStop saga: how a small video game retailer worth less than $1 billion, fuelled by day trader investors and reddit message boards, went on the ride of its life – rocketing its share price from $20 to $400 dollars in the span of a few days. The company’s meteoric rise wiped out billions of dollars from institutional investors who had bet against GameStop. And then, as quickly as it rose, it began to fall again. The company’s shares lost three quarters of their value in just 85 minutes wiping out many retail investors.
Professional traders argue that platforms like Robinhood – no fee stock trading apps of factional shares – are to blame for this market volatility. These platforms are encouraging average people to gamble with their life savings in exceedingly risky ways that destabilize financial market for everyone. Retail investors see the GameStop frenzy is a long overdue populist pushback against Wall Street hedge funds and their predatory short-selling practices. The new platforms are a welcome innovation in financial markets. They level the playing field by allowing anyone to trade the markets at minimal cost, in real time, using options and leverage just like any large market participant.
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