The Big GameStop Short Squeeze
Video gaming has certainly had it’s time in the limelight the past few years – the growth of esports has attracted millions of fans to the prospects of gaming alongside the growth of a betting market here at esportsbetting.site to attract a huge crossover audience of fans, similarly the successes in mobile gaming have made the market much wider than ever before. The start of 2021 brings different news of gaming and betting together, however, as an unlikely candidate in the US gaming retailer of GameStop has become the target for a big, short squeeze, and has shown how much impact a single community can have.
The reddit community of /r/wallstreetbets at the time of writing this is a 4.3 million strong community – prior to this year the main content had been those betting on different stocks had the opportunity to show their own positions and show off their big wins and losses, and in general discuss what had been happening with the market in general. But the start of 2021 has been very different – whilst the stock had been sitting around the $20 mark, the community discovered that the stock had been heavily shorted by investors who believed the ongoing pandemic would have a marked negative effect on the sale of physical game stores, the community pulled together in order raise the stock price to a current high of nearly $150. A short squeeze occurs when a stock price jumps very quickly and forces the traders who had bet against the stock to reinvest to forestall greater losses – the current value of the losses has been titled at some $5 billion through a community driven act of defiance.
(Image from forbes.com)
More than anything, it shows the power a single community can have when pulling together – there are plenty of pundits calling out the actions and many that have jumped on board and have enjoyed the shift that’s happening – with some hedge funds such as Melvin Capital requiring a huge cash infusion just to stay afloat, it has somewhat moved past the point of a defiant joke and more towards the showing of a huge powerplay, and it is quite entertaining from the outside. It’s not really known how long this can go on for, and extended periods of time with this could cause the stock price to grow higher yet and may also be the cause of some other funds finding themselves in a spot of bother as their initial position continues to be challenged by the growing number of investors joining the short squeeze.