We’re apparently living through the “Great Acceleration”. The COVID-19 pandemic has intensified existing trends. As the historian and philosopher Yuval Noah Harari puts it, emergencies have a tendency to “fast-forward historical processes”. One such trend accelerated by the pandemic has been the death of high street retail.

GameStop is the largest video game retailer in the world. It was founded in 1984, and has suffered badly from video gaming’s switch to digital distribution. In 2020, GameStop announced plans to close hundreds of stores permanently. At that time, shares in GameStop were trading for around $3 a share.

Another trend the pandemic has accelerated is stock trading apps. Robinhood is one such app, attracting young first-time investors with its simple, gamified interface. It has seen its user base skyrocket by millions during the pandemic, and the company loftily promises to “democratise finance for all”.

Robinhood is now at the heart of a “David vs. Goliath” battle between meme-loving Reddit users and Wall Street hedge funds. The funds had “shorted” GameStop (essentially betting that GameStop’s stock would drop in value), and thousands of small investors coordinated a mass stock-buying campaign on Reddit to pump up GameStop to (at one point) over $480 a share. The hedge funds who bet on GameStop stock falling ended up losing billions.

At this point, Robinhood restricted trading of GameStop stock. At a time of intense partisanship, Robinhood managed to unite politicians from both the left and right in condemnation. Critics accused the company of effectively rigging the market against small traders, while allowing hedge funds and big investors to trade normally.

However, analysts caution that most small traders stand to lose money. Few dispute that GameStop stock is massively overvalued and will come crashing down hard. Regulators are now wondering if they should step in to raise margin requirements and make it harder for this to happen again in future.

Was it wrong for Robinhood to restrict Gamestop trading? Should regulators tighten up the rules around stock manipulation? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: (CC BY-SA 4.0) Michael Rivera


7 comments Post a commentcomment

What do YOU think?

  1. avatar
    Gabriella

    Interferencing in free markets in order to save the hedge funds???? Kidding??? This is what dictatorhip nad communism looks like….

  2. avatar
    Daniel

    In my opinion it wasn’t wrong at all… was a protective measure not just for them but for the users… People always tend to follow the herds, the mainstream, the hype… Without fully knowing what at play.It’s not good capitalism providing valuation above the real market, a company or an asset must not be valued through speculation, it’s fake value, fairydust, utility does not exit on those case, we saw what happened in 1918 when JP Morgan and others tried to fight the market it went way worse and lead to the Great Depression.Now more than ever before anyone in the society can easily open a trading account, use massive leverage and trade without fully know it and then lose it all… It’s bad for them but also for those who are disciplined and take trading seriously.I do trading mainly on commodities (gold) but I don’t trade everyday, as a protective measure for myself I avoid trading with moments in which lots of volatility exists, per example NFP data appears, I just don’t, people don’t understand that you put 100€ and get a profit of 10€ that’s a 10% ROI, which annualy is one of the top ROI for investment funds, when people stay addicted and try to trade more and more thinking they will get rich quick they start losing until they actually lose it all…I just take one trade per day, I avoid too high leverages and trade when there’s volume and momentum, and avoid always volatility. It’s a good passive income but requires emotional strength, discipline, humility, resilience and many people trading don’t have those.So to conclude Robinhood was like the protective mentor that most people didn’t want but that most people needed.

  3. avatar
    Ioannis

    Robinhood has been bitten in their own game. They produce money (not wealth) in a very questionable way. They borrow shares, sell them, make sure that their price falls, retrieve them at a lower price, return them to those who borrowed them, making large profits on that.If this justifies riches, and EU thinks that it has a meanigful impact to the economy and the production of wealth within the eurozone and globally, then “something is rotten in the states of the globe”.Major hedge funds had bet billions of dollars that GameStop’s shares would fall. Suddenly, when individuals combined together to impact stock prices as hedge funds do, but in the opposite direction (raising their price), the free market is introduced to restrictions.If restrictions serve only to defend hedge funds and their gains and losses, the answer is very simple.It was wrong.Restrictions should be introduced to how hedge funds work long time ago.We should thank the real robinhoods of this world.

  4. avatar
    John
  5. avatar
    Borislav

    This question will be one of those that will persist in the future…

  6. avatar
    Michał

    It was a measure against retail consumers causing a market disruption, which was in favour of the hedge funds and other institutional big fishes. Hope they will loose the very legitimate law case and would be sentenced to pay back.

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