Retail investors have been giving the more traditional investors like hedge funds a kick in the backside for the last few days, but they are fighting a losing battle.
The last couple of days have been hectic for the people following r/wallstreetbets and all the brave followers that have been joining the movement and been fighting a battle against the big boys bravely by refusing to sell any shares in $GME and “holding the line” are about to lose.
Unfortunately for the admirable Reddit mob, the rally is losing steam with Gamestop falling with 60% with a lot of people selling or as they are called by Reddit, paper hands. What can’t be denied is that the general market has lost trust in Wall Street that will be difficult to repair after multiple brokers halting trading in Gamestop, which was the beginning of the stock taking a plunge. The short interest has also dipped from a value of over 120% to around 50% now, so even though there is still a possibility of a Gamma squeeze it will most likely not be as strong as before. However, Melvin Capital lost 53% in the month of January, well-played r/wallstreetbets.
The Robinhood crowd had to find out the ugly way that if you are partaking in something that is completely free like commission-free trading platforms and the only reason the product exists is to create a mass-audience, then you are the product. This was proven with Robinhood selling order flows of traders to firms like Citadel.
After this intense period that has unfolded and will go down in history, what is actually next?
The interest in stores of value is bound to increase
Retail investors thought that they could pump silver in a similar manner that they have pumped different assets such as $GME and $DOGE. However, that was a naive thought considering it is a commodity and the big players involved. Now I am well aware that silver was up over 8%, which is the most it has up for over a year. But, compared to the price action that was created in $GME and $DOGE, etc., this was simply vanilla, and thinking that you could pump one of the most precious metals on earth like any other stock was bound to be a failure.
The interest in precious metals like silver is bound to increase with a lot of people fearful in the market of a possible crash. The markets are at all-time highs and what comes up must also come down. Why is this important? Well, the way to maintain your purchasing power over time has been to invest in gold that has 8 trillion dollars currently stored in the asset since people do not want to hold the dollar and gold is normally apart of a diversified portfolio.
Silver is the second largest store of value as a metal with 50 billion stored in the asset. However, there is a store of value that has eclipsed silver, even though that it isn’t a metal and that is Bitcoin with a store of value that is equaled to 60 billion.
But could Bitcoin actually become a currency? I do not expect it to become a currency that replaces the dollar because the challenges bitcoin faces are that it is the first decentralization entity that achieves scale and there is no functional governance of bitcoin. This means that it struggles to evolve. However, as a store of value, it is highly effective and the performance of Bitcoin since its existence is unrivaled even if you look over the past 12 years, 5 years, or 3 years.
The Crypto Market is about to take off
Even though bitcoin faces some challenges in terms of how it achieves scale does not mean that I am not bullish on it and the crypto market in general. As I mentioned in my previous article there is a strong need for De-Fi after the Robinhood incident. People will not tolerate brokers creating their own rules in the market when the retail investors finally understood how to get their hands dirty in the same way as hedge funds do, they then had the rug pulled out from under with trading being halted.
Since Bitcoins meteoric rise since the crash in March 2020, it reached all-time highs of over $40 000, it has been facing a correction since then and as I diligently repeat and that everybody should do as well, corrections are a healthy part of every bull market. Ethereum has been facing the same issue but finally broke past its resistance and is at an all-time high level of over $1500. Considering the trust has been lost among the retail investors, more capital will be moved to the crypto market where it is more volatile without any question. But at the same time, there is no broker that can halt the crypto trading, which will be even more appealing for the De-Fi crowd going forward.
Reflation and Vaccines are coming
Anybody that hasn’t been living under a rock has missed that the governments are pumping out money to keep the economy afloat after a period of an economic slowdown. The U.S government handing out stimulus checks to their citizens is just one of many examples of this and the money printer is working hard.
The vaccines are also being rolled out and they are ramping up the speed in producing them as well. While NVAX delivered the best results yet in terms of efficacy in the biotech space. This has been evident with the stock increasing by over 100% in the last few days. That is also why this might have the possibility of delivering optimism to the market and it is not impossible that we see a resurgence of airline stocks and other segments in the market as well.
The effect these factors will have on the market going forward will have to be seen, but there are exciting times ahead.
Lastly, I want to clarify that even though I am a finance professional, this is not financial advice, and this article is only meant to bring light to the current market situation. I advise everybody to do their own research, I only want to help you to find what you are looking for.