At the hearing, committee members expressed concern with respect to gamification of investment, encouraged by trading platforms such as Robinhood, largely adopted by retail investors due to low commissions. They called as witness Reddit user Keith Gill, known as u/DeepFuckingValue on WSB, who had a central role in triggering the collective action.
Finally, the House Committee on Financial Services of the US Congress held a hearing titled Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide to discuss the events. a trader trying to gain an advantage by reading the signals about how other investors are feeling about a particular stock) with 3 years of active trading experience and having been a member of WallStreetBets for more than a year with karma-a Reddit measure of ‘how much good the user has done’ for the community-of more than 1000. Cindicator Capital, a fund specialized in digital assets, published a hiring call for a sentiment trader (i.e. Notably, the US Treasury Secretary Janet Yellen convened a meeting of financial regulators including the heads of the Securities and Exchange Commission, Federal Reserve, Federal Reserve Bank of New York and the Commodity Futures Trading Commission to examine the GameStop squeeze. These events garnered huge attention from the media, professionals and financial authorities.
The short squeeze was initially and primarily triggered by users of the subreddit r/wallstreetbets ( WSB), a popular Internet forum on the social news website Reddit, who managed to translate online discussions into a highly coordinated financial operation.
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Victims of the squeeze were professional hedge funds, and particularly Melvin Capital Management who lost 53% of its investments for a total estimated 4.5 billion USD. who ‘shorted’ it) were forced to buy it in order to prevent even greater losses, thus further promoting the price rally. As the price sharply jumped higher, traders who had bet that its price would fall (i.e.
In January 2021, the GameStop shares traded on the New York Stock Exchange experienced a classic ‘short squeeze’. These findings shed light on financial collective action, as several observers anticipate it will grow in importance. Finally, we show that the social identity of the broader Reddit community grew as the collective action unfolded. Third, we reveal that initial committed users occupied a central position in the network of Reddit conversations. Second, we show that the increase of commitment within Reddit pre-dated the initial surge in price. First, we operationalize the concept of individual commitment in financial discussions. Here, we analyse Reddit and financial data and rationalize the events based on recent findings describing how a small fraction of committed individuals may trigger behavioural cascades. Such an effective collective action was unprecedented in finance, and its dynamics remain unclear. In January 2021, retail investors coordinated on Reddit to target short-selling activity by hedge funds on GameStop shares, causing a surge in the share price and triggering significant losses for the funds involved.
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