Even the always-noisy crypto room has been flooded with comments about the Gamestop (GME) saga that’s happening right now in the traditional financial world.
For those of you who didn’t get it, here’s a quick recap:
Gamestop, the video game retailer, has been shorted by major hedge funds in anticipation of its stock falling more than 140 percent of its share price.
Retail investors on WallStreetBets, the famous subreddit for stock trading, became aware of the trend and began buying options to buy the stock.
The stock began skyrocketing on its way into 2021 and culminated in a massive squeeze on the upside last week.
Due to the fact that there were so many stock shorts from GME, those who held those positions went underwater.
Some short sellers have had to close their positions or have been taken off the market by other companies.
Due to the high demand and the uncertainty about the legality and risk of the price development of Gamestop, brokerage houses have begun to stop trading GME across the United States.
It’s by far the biggest financial story of 2021. Crypto investors, DeFi cops in particular, are perceiving this trend as a sign that on-chain financial applications are the future.
Economist Alex Krüger put it well when he said:
“Great thread about WSB and RobinHood. The problem: the system has been manipulated. The solution: decentralized finance. It can’t get any clearer. “
The feeling that the system is „manipulated“ arises because WallStreetBets and the traders in the ecosystem have problems using platforms – from Discord and Reddit to trading platforms like Robinhood themselves.
DeFi, by comparison, is considered trustworthy and fair because it cannot decide whether users trade or not. Instead, the qualifications one has to interact with different platforms, whether the Uniswap is on Ethereum (Go to Buy Ethereum Instructions ) or another app on a new blockchain, is based on its ability to pay the transaction fee.
While the Gamestop saga doesn’t directly drive capital to DeFi , many have found that it shows how much space the decentralized finance space has to grow.
Santiago Roel Santos, head of ParaFi Capital, put it nicely when he found that Gamestop’s market capitalization (at least at the height of yesterday’s rally) was practically larger than any DeFi coin currently in circulation.