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META 1 Coin Report: The GameStop Phenomenon: How Humanity Beat Institutions

GameStop (GME) is a brand with strong sentimental value among millennials who fondly recall buying videogames at its stores years ago. In recent years, as the company’s popularity declined, the stock price of the company generally hovered around $4 per share.

That was until late 2020, when it began to rise in value after some individuals on the popular online forum site Reddit made some observations about extensive short positions and decided to apply a strategy previously used in crypto to drive the price past $200 per share, as of this writing. The over 3000% gains of GME within one year have dwarfed Bitcoin’s rise during the same time period.

These Reddit users, many of whom are younger retail investors, noticed that GameStop was one of the most heavily shorted stocks on the market. Large hedge funds generally produce higher than average returns on their investments by placing bets in the market that a particular stock will decrease in value.

These bets are commonly known as shorts or put options. Put options are publicly viewable without personal information, much like how blockchain data is publicly viewable, so the extensive short positions placed on GameStop’s stock caught the attention of these astute observers.

An idea emerged, that if the dedicated users of a particular Reddit forum that includes over 2 million members all banded together to buy and hold the GameStop stock, then it would drive the price of the shares up. The upward drive potential was large since GME is a lower market cap stock with less liquidity than larger, more popular stocks. The fact that it had lower trading volume meant that the stock price could be pushed upward much faster and higher than usual.

Besides the upward price push resulting from the mass purchases of a large unified ‘Reddit army’ of individual investors, the upward climb would force a situation known as a short squeeze. Since those who have bought put options on a stock are betting on the fact that the stock price will decrease, they are obligated to buy shares of the stock if it increases to cover their short position. When those holding these put options are hedge funds with large positions, this triggers a large, forced stock purchase by these institutions which drives the stock price exponentially higher.

Amid a series of short squeezes which triggered built-in circuit breaker systems in the stock market that temporarily halted trading on the stock numerous times, hedge funds lost over $3 billion so far, and one major hedge fund, Melvin Capital, received a $2.75 billion cash infusion (aka a bailout) from another fund to maintain its operations before ultimately closing its large short positions in GME, taking on billions of dollars more in losses. While these institutions have been hemorrhaging money, individuals have made fortunes in the process of following the classic crypto HODL strategy. HODL stands for Hold On for Dear Life, which describes the approach of holding an asset even during highly volatile dips in value to secure long term gains.

Traditional finance news outlets including CNBC have been expressing shock and confusion about the 3000%+ increase in stock price since last year since there have been no developments with the company itself to warrant this rally, besides Elon Musk tweeting about GME late in the rally. In the absence of traditional financial data, they have declared it to be a regime change in the world of finance. Previously, large institutions such as hedge funds could easily and legally manipulate markets with outsized short positions that signaled the impending likelihood of a stock’s collapse. Now, the power has shifted into the hands of individual Humans who can work together in a decentralized manner to dominate markets.

There are questions about how long this GameStop rally can last. Many also said similar things about crypto in its earlier days. But this phenomenon proves the validity of META 1 Coin’s basic premise – that empowerment of Humanity is critical and inevitable. While institutions and centralized agencies were able to control power in the past, advances in technology and decentralization have enabled Humanity to reclaim this power and to drive abundance for all, instead of a select few.

Likewise, as coin holders join forces to buy and hold META 1 Coin, the potential for abundance increases for all who participate. We are encouraged by seeing this victory of Humans over non-human entities and look forward to seeing the continued success of Humanity with META 1 Coin.

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