GME short squeeze highlights the perks of the DeFi sector

Written by: Jinia Shawdagor
January 28, 2021
  • GME’s trade volume outperformed S&P 500 and other leading stocks after rising 185%.
  • This short squeeze saw centralised authorities introduce trading limits on the stock.
  • According to crypto proponents, this event is a significant boost toward mass DeFi adoption.

Centralised trading platforms such as NASDAQ have limited GME trading after the GameStop short squeeze, which pushed the stock’s value to £270 from a mere £14.6 earlier this month. This surge marks a 185% gain, and GME’s volume surpassed the S&P 500 among other leading stocks globally. Reportedly, members of the r/WallStreetBets subreddit organised the pump after discovering a hedge fund had lined up short bets against the stock.

Individual traders executed the short squeeze through platforms like TD Ameritrade and Robinhood, a move that saw hedge fund Melvin Capital Management (MCM) plunge 30%, losing approximately £2.73 billion.

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After MCM’s luck, or lack of thereof, multiple centralised trading platforms introduced limits on trading the GME stock. For instance, Adena Friedman, the president of NASDAQ, which currently lists GME, said that the exchange might temporarily suspend the trading of stocks that internet users have targeted to let investors recalibrate. Apart from this, the r/WallStreetBets subreddit was temporarily taken offline, and its Discord channel was also suspended for allegedly flouting content moderation policies.

These actions attracted the attention of the crypto-verse, which believes that the GameStop short squeeze has served to expose the deficiencies of centralised financial systems while highlighting the importance of decentralisation, more so decentralised finance (DeFi).

Crypto is the greatest financial protest

Per Mike Novogratz, the CEO of Galaxy Digital, a crypto management firm, GME’s short squeeze is a massive endorsement for DeFi. He said that the movement started with people distrusting a central authority, the same concept that birthed cryptocurrencies.

He aired these sentiments via a tweetstorm saying,

This GME squeeze is deeper than a squeeze. It’s a large group of people saying they don’t want Citadel preying on their orders from RH, they don’t want IPO’s being allocated to insiders, they don’t like a system geared to the already rich. This is a giant endorsement of DEFI.

He also compared the squeeze to the social unrest in the US, highlighting incidents like the mob attacking the capital and the Black Lives Matter protests, which came after George Floyd’s murder.

The squeeze also impressed Haralabos Voulgaris, the current Director of Quantitative Research and Development for the Dallas Mavericks. However, he noted that the members of the r/WallStreetBets subreddit would soon realise that BTC is the largest financial protest, perhaps hinting that they should join the crypto-verse.