This newsletter is sponsored by PHEMEX, the only exchange that I use to trade crypto with leverage. Sign up with the link above and get some free Bitcoin. I really encourage you to check them out - you know that I never endorse a product that I do not use!Every so often, a dramatic financial anomaly grabs headlines and reveals the flawed mechanisms of the stock market. The most recent notable oddity was Hertz’s parabolic run during Covid-19’s peak fear, skyrocketing in the most unlikely of times. Hertz declared bankruptcy, but Dave Portnoy and his rugged band of retail traders saw it as a "deal" and pumped it many multiples.Now it’s GameStop that is in the spotlight. GameStop broke a 6+ year bear cycle when it caught the attention of a subreddit by the name of WallStreetBets. Articles are calling the recent move the “short squeeze of a lifetime” as the stock rose over 700% in under 2 weeks, with absolutely no fundamental improvements to the company.As crazy as this seems, there has been an all-out war between Wall Street short sellers and Reddit warriors. The damage dealt to short-sellers was so brutal that different asset managers had to rescue one hedge fund, which suffered almost 3 billion in losses from being on the wrong side of the squeeze. Specifically, Citadel and Point72 are investing (backstopping) $2.75 billion into Melvin Capital who was superman short GameStop. Melvin is down over 30% in 2021.Reddit users celebrated the rise of GameStop’s stock by upvoting comments, begging followers to “HODL” and praising the purchaser of a nearly $100,000 market order that filled at a price of over $70.The strategy is simple. Find a stock with heavy short interest of a company that should fundamentally be dropping. Band together and buy as much as you can, causing shorts to cover, which become buy orders and fuel a parabolic rise. Easier said than done, because it requires quite a bit of capital and cojones. Here are the specifics with regard to GameStop.The 3 top holders are Fidelity (FMR), Blackrock and Vanguard. GameStop’s float (tradeable public shares) is 46.89 million and those 3 funds alone own half of that available float. So if you subtract those 3 holders alone, there are really only 23 million shares really tradable.Where it gets interesting is that the short interest was 71 million shares held short. On the opposing side, the WallStreetBets call buyers created the ultimate “gamma squeeze” into a horribly tiny float. We see it all the time in crypto markets, but we should NOT see it in the stock market, where bad companies deserve to die.In addition to GameStop, yesterday saw Blackberry stock rise over 30%, prompting the company to make a statement that nothing had fundamentally changed with their business.Hedge funds traders are lamenting that the market has become nearly impossible to predict now because it is being driven by retail and not by the fundamentals of the assets. What's the value of research and knowledge when a bunch of ragtag TikTokers can destroy your analysis by simply buying the worst and most heavily shorted companies?While this may seem humorous, it's a flashing red light for the strength of the market and should not theoretically be possible. Further, we ALL know how this story ends - in a trail of retail tears.The details of this story go far deeper than I can summarize, with each new day adding to the absurdity. My takeaway is this: the market is irrational and it may not end anytime soon. Forget what you know or think and don't underestimate the power of a dedicated group of people. Part of what I see in this story makes the Bitcoin case clear. A tight-knit community like the one on Reddit has banded together around a new asset and is ready to stick it to the man or die trying. Hertz and GameStop may be failed companies, but this behavior paired with an asset of real value like Bitcoin could end up writing the most epic story of the early 21st century.(Buy Bitcoin)In This Issue:Bitcoin Thoughts And AnalysisAltcoin ChartsLegacy MarketsThe GBTC Trade ExplainedSifchain - The World’s First Omni-Chain DEXPrestigious University Endowments Are Buying BitcoinJanet Yellen Is ConfirmedThe Wolf Of All Streets Podcast Ft. Steven McClurgMy Recommended Platforms And Tools
The Wolf Den #164 - Reddit Vs. Wall Street
The Wolf Den #164 - Reddit Vs. Wall Street
The Wolf Den #164 - Reddit Vs. Wall Street
This newsletter is sponsored by PHEMEX, the only exchange that I use to trade crypto with leverage. Sign up with the link above and get some free Bitcoin. I really encourage you to check them out - you know that I never endorse a product that I do not use!Every so often, a dramatic financial anomaly grabs headlines and reveals the flawed mechanisms of the stock market. The most recent notable oddity was Hertz’s parabolic run during Covid-19’s peak fear, skyrocketing in the most unlikely of times. Hertz declared bankruptcy, but Dave Portnoy and his rugged band of retail traders saw it as a "deal" and pumped it many multiples.Now it’s GameStop that is in the spotlight. GameStop broke a 6+ year bear cycle when it caught the attention of a subreddit by the name of WallStreetBets. Articles are calling the recent move the “short squeeze of a lifetime” as the stock rose over 700% in under 2 weeks, with absolutely no fundamental improvements to the company.As crazy as this seems, there has been an all-out war between Wall Street short sellers and Reddit warriors. The damage dealt to short-sellers was so brutal that different asset managers had to rescue one hedge fund, which suffered almost 3 billion in losses from being on the wrong side of the squeeze. Specifically, Citadel and Point72 are investing (backstopping) $2.75 billion into Melvin Capital who was superman short GameStop. Melvin is down over 30% in 2021.Reddit users celebrated the rise of GameStop’s stock by upvoting comments, begging followers to “HODL” and praising the purchaser of a nearly $100,000 market order that filled at a price of over $70.The strategy is simple. Find a stock with heavy short interest of a company that should fundamentally be dropping. Band together and buy as much as you can, causing shorts to cover, which become buy orders and fuel a parabolic rise. Easier said than done, because it requires quite a bit of capital and cojones. Here are the specifics with regard to GameStop.The 3 top holders are Fidelity (FMR), Blackrock and Vanguard. GameStop’s float (tradeable public shares) is 46.89 million and those 3 funds alone own half of that available float. So if you subtract those 3 holders alone, there are really only 23 million shares really tradable.Where it gets interesting is that the short interest was 71 million shares held short. On the opposing side, the WallStreetBets call buyers created the ultimate “gamma squeeze” into a horribly tiny float. We see it all the time in crypto markets, but we should NOT see it in the stock market, where bad companies deserve to die.In addition to GameStop, yesterday saw Blackberry stock rise over 30%, prompting the company to make a statement that nothing had fundamentally changed with their business.Hedge funds traders are lamenting that the market has become nearly impossible to predict now because it is being driven by retail and not by the fundamentals of the assets. What's the value of research and knowledge when a bunch of ragtag TikTokers can destroy your analysis by simply buying the worst and most heavily shorted companies?While this may seem humorous, it's a flashing red light for the strength of the market and should not theoretically be possible. Further, we ALL know how this story ends - in a trail of retail tears.The details of this story go far deeper than I can summarize, with each new day adding to the absurdity. My takeaway is this: the market is irrational and it may not end anytime soon. Forget what you know or think and don't underestimate the power of a dedicated group of people. Part of what I see in this story makes the Bitcoin case clear. A tight-knit community like the one on Reddit has banded together around a new asset and is ready to stick it to the man or die trying. Hertz and GameStop may be failed companies, but this behavior paired with an asset of real value like Bitcoin could end up writing the most epic story of the early 21st century.(Buy Bitcoin)In This Issue:Bitcoin Thoughts And AnalysisAltcoin ChartsLegacy MarketsThe GBTC Trade ExplainedSifchain - The World’s First Omni-Chain DEXPrestigious University Endowments Are Buying BitcoinJanet Yellen Is ConfirmedThe Wolf Of All Streets Podcast Ft. Steven McClurgMy Recommended Platforms And Tools