CedarFX: Wallstreet Regaining Equilibrium

on Feb 8, 2021
Updated: Dec 19, 2022

The social-media-driven frenzy that took hold of Wall Street over the last week has shaken the financial services sector to its core. Following rising expectations of tougher regulation, however, global shares have been recovering steadily.

The turmoil caused by a Reddit group pushing for people to trade heavily shorted stocks, such as GameStop and AMC, forced hedge funds to reduce their equity books, which led to the closing of some firms and scrutiny over the sector as a whole. Moreover, in an attempt to keep afloat, retails brokerages implemented restrictions on up to 50 stocks, essentially blocking individual traders out of the action and snatching power from the majority.

The after-effects of this saga are likely to be felt for years to come, as regulators have no way out of re-assessing the role of stock exchanges and brokerages within the financial markets.

Recovering from Rampant Volatility

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Apart from shedding light on the huge degree of power that non-bank trading firms hold, this event has also created unusual levels of volatility across various markets and instruments. As the wild GameStop bubble burst, the stock price fell back down to earth, erasing over $27 billion in market value. This swift retreat was welcomed by Wall Street investors and new regulations would
prevent this phenomenon from repeating itself in the near future. But, while the stock markets went rogue, individuals were able to reap profits by trading stocks that had been heavily-shorted, proving that there are opportunities to be found in volatile markets.

US Dollar: Stronger than Ever?

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Sentiment around the US Dollar has been rather positive during the past trading week for several reasons. Investors seeking a safe-haven asset amid the retail stock crisis turned to the Dollar, which was also boosted by hopes that U.S. President Joe Biden’s proposed $1.9 trillion COVID-19 aid bill will be approved.

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The growing strength of the US Dollar is particularly evident against the Euro, which has been struggling as investors show optimism in the greenback. Ready to ride the market waves? Start trading forex, stocks, indices and much more with the world’s first eco-friendly broker CedarFX. Whether you choose a 0% Commission Account or an Eco Account, you’ll be supporting CedarFX on its mission to plants trees for every trade. Sign up today to benefit from up to
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