Retail Investors vs. Wall Street: Will the reason for the birth of WSB lead to its entry into the crypto space?

Recently, the most popular news in the cryptocurrency industry is the long-short battle between a group of retail investors (WSB wallstreetbets) and Wall Street elite funds around GME (GAMESTOP) stocks. This big showdown is considered a historic event that can be recorded in history. In the 100-year history of Wall Street, although short squeeze dramas are common, this is probably the first time that retail investors have gathered together to fight against Wall Street elites.

Different from the traditional long-short duel, this GME battle has at least the following special features:

1. For the first time, organized retail investors became the protagonists of the long-short duel. In the past Wall Street long-short battles, the two sides were all Wall Street tycoons from different camps, but this time the protagonists became Wall Street tycoons and retail investors (WSB). The former's strength and the latter's weakness formed a strong contrast. Although WSB once had an advantage, it was immediately strangled by hedge funds, social media, trading platforms and even the US government, which cast a tragic color on the whole event like the Paris Commune uprising.

2. Retail investors gather in a community, and community consensus becomes the core cohesion of organizing these retail investors. The organization and mobilization of WSB retail investors this time has obvious decentralized characteristics, only attached to the WSB community, but without a leader. The strong emotions or consensus that permeate the entire community are what unite people, that is, breaking the old order represented by Wall Street. In the eyes of WSB, Wall Street elites are the culprits who hollow out the general public. These establishment figures take salaries that are not commensurate with their abilities, live a life of luxury, and make the general public pay for their huge disasters. This unfair world must change, and Wall Street needs to pay for their greed.

3. Retail investors have demonstrated great wisdom and resilience under the self-organization of decentralized communities. Through posting and discussion on the board, the WSB community has produced a large number of high-quality research reports. Among many targets, GME was selected by the community and became the main target. Going long on GME may seem irrational, but it is actually quite desirable. Although GME is a bad company, with Wall Street short sellers led by Melvin Capital frantically shorting this stock over the past year, short trading on GME has become overcrowded. Not only is the short interest rate extremely high, but the number of shorted stocks has also exceeded 138% of the number of outstanding shares. The crowded short formation contains huge risks of short squeeze. WSB seized this weakness and launched a head-on attack on Wall Street short sellers.

Before this, retail investors have never demonstrated such strong fighting power.

The reason for this is firstly the long tail effect caused by social media. The rise of platforms such as Twitter, Reddit, and Discord has enabled retail investors who were previously in a state of disunity to be organized through common values, demonstrating their terrifying power to move mountains and fill seas.

Secondly, the emergence of new stock trading platforms and the convenience of trading have led to a rapid increase in the number of retail traders, which has strengthened the ranks of retail investors. Now, through stock trading apps such as Robinhood, retail investors no longer need to rely on institutions for investment, and can use many tools that were previously only available to institutional traders, which was unimaginable before.

Finally, the large amount of subsidies and relief funds issued by the US government to control the epidemic provided retail investors with sufficient firepower and ammunition. In the face of the pandemic, many people cannot go to work and have nowhere to spend money, so they can only enter the stock market to speculate and relieve their loneliness. Various factors intertwined together made WSB the first retail army mobilized by social media organizations and armed by the Federal Reserve and Robinhood.

In addition, it must be noted that the underlying driving force behind this epic showdown between the WSB retail investors and Wall Street hedge funds, like a collision between Mars and the Earth, is some profound structural problems that have long existed in American society.

In the United States, the conflict between ordinary people and Wall Street elites has a long history. Since the financial crisis in 2008, the United States has used government funds to save greedy Wall Street institutions. The long-term reliance on loose monetary policies has caused a serious problem of wealth disparity. A wave of anti-Wall Street and establishment thought has emerged in American society, and has resonated strongly among ordinary people. People can't help but ask, why can the elite class have the right to make rules and enjoy the wealth brought by asset bubbles, while letting ordinary people bear all the adverse consequences?

Today's WSB movement and Bitcoin can actually be said to be the products of this anti-Wall Street trend of thought. Both have inherited the spiritual legacy of the Occupy Wall Street movement and represent the challenge of traditional marginal groups (geeks, otakus, retail investors, etc.) to the pricing power of the traditional Wall Street elite, that is, "We give value to things that Wall Street considers worthless. Why should Wall Street be the only one to make the rules and price things?"

Because of similar ideas, members of the two communities often overlap. For example, Chamath, who spoke for the WSB movement on CNBC, is also a long-term Bitcoin supporter. However, the Bitcoin movement is relatively gentle, while the WSB movement is more concentrated and violent - protesters use real money as bayonets to try to bleed Wall Street elites directly. It is worth observing whether WSB will shift the battlefield to cryptocurrency in the future. Dogecoin, which was promoted by fake accounts and suddenly soared by more than 400%, seems to be a sign.

Anger is often aroused by opponents, but in the world of cryptocurrency, who is WSB's opponent? The surge in mainstream coins this year was largely driven by Wall Street's recognition. There is a joke that cryptocurrency was born to fight against the mainstream, but now mainstream institutions and retail investors are on the same front. Dogecoin is a product of community culture that is not recognized by institutions, and its surge is similar to GME in terms of sentiment.

Regardless of the outcome of this GME incident, it indicates that a new era has arrived. The conflict between the civilian value system and the Wall Street elite value system is inevitable, and similar incidents will continue to repeat in various forms. The prelude is over, and the curtain is about to open? (Picture from Ricky Gutierrez ）