GameStop Stock Returns to Earth, Robinhood Lifts Trading Ban

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In Brief
  • GameStop (GME) has declined rapidly during the week of Feb 1 - 5.

  • On Friday Feb 5, Robinhood announced that it had lifted the trading ban.

  • Meanwhile, social media has galvanized communities against the monopolistic practices of Wall Street.

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GameStop (GME) has declined to pre-pump levels and is hovering near $54 in pre-market trading. Meanwhile, traders are once again free to open both buy and sell orders.

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On Feb 5, trading platform Robinhood lifted restrictions previously imposed on two Reddit-pumped stocks. The ban occurred due to unprecedented price action on GameStop and AMC (AMC) Entertainment.

The Game Finally Stops

GameStop has recorded a staggering plunge over the last few days as the price fell from $350 to ~$53. The GME chart is notably parabolic and no doubt painful for certain bagholders.

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The stock traded above $43 before the frenzy. Many hedge funds believed the company was on the brink of collapse before retail traders drove prices skyward.

In January, the saga started when investment firm, Melvin Capital, placed an aggressive short sell on GME. Reddit traders at r/WallStreetBets saw this as an opportunity. 

They continued to add significant long positions, squeezing Melvin Capital in the process. This led to heavy losses for the company. Much of the motivation was sentiment based. This appeared to have rallied social media traders in a quest to defend the “small guys” from Wall Street.

Support From the Crypto Community

The market mania was further aggravated by notable crypto figures who took part in the GameStop trade. The CEO of Tron, Justin Sun, had announced his support via Twitter.

Sun declared his solidarity by pledging to participate in the trade with a $1 million backing. He later decided to up the total to $10 million. Meanwhile, he was not the only crypto influencer to show support for the Redditors. Anthony Pompliano, also known as Pomp, used his podcast to express dissatisfaction with Wall Street activities.

Pomp believes that the events that led to the short squeeze were the beginning of a paradigm shift. He accused banks and hedge funds of participating in trades that took advantage of smaller players in the financial space. 

He highlighted the story of a Redditor who claimed he was the victim of market manipulation during the 2008 recession. Pomp believes that Melvin Capital deserved what it got.

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Alo Kingsley is a content writer with 4+ years of experience in writing within the blockchain and cryptocurrency niche. He first discovered Bitcoin in 2016 and has been passionate since then about various ways Blockchain can help Africa and the world at large. He aims to give the crypto space a more geographically balanced narrative as it evolves.

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