Are you thinking of investing in crypto? Now’s not the best time. Here’s why, in 60 seconds.
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GameStop phenomenon: How Reddit rocked Wall Street
Let’s rewind to 2020. Keith Gill, a 33-year-old investing enthusiast, was frequenting a Reddit forum dedicated to investing. During one discussion, someone said that GameStop’s stock, priced at $5 per share, was a great bargain.
Over the next year, Gill invested his life savings into this stock. By January 2021, the value of Gill’s initial $53,000 investment in GameStop had skyrocketed to nearly $50 million.
Was he a financial whiz? Nope. Gill wasn’t the only person who made tens of millions of dollars or lost more than that. Sony just released the trailer for a movie based on GameStop that shows how interconnected the world of technology, finance and social media is. You’re not going to believe this story.
David vs. Goliath showdown
In late 2020, folks hanging out in the Reddit group r/WallStreetBets were chatting about GameStop. They saw that the big hedge funds were betting on GameStop’s failure and thought, “Hey, what if we could change that?” So, they started to work together to buy lots of GameStop stock.
This would increase each share’s price and hopefully show those hedge funds they were wrong to bet against GameStop.
The hedge funds had been “shorting” GameStop’s stock, effectively gambling on its price to keep dropping. This involved borrowing and selling shares on the open market, intending to repurchase them later at a lower price and profit from the difference.
Retail investors take the stage
More investors were now following the stock and began buying GameStop shares and call options in droves, leading to a “short squeeze.” This sudden influx of buying activity drove up the stock’s price, putting the hedge funds in a very tight spot. Their bets were not working, to the tune of hundreds of millions of dollars.
At the peak of the frenzy, GameStop’s stock price skyrocketed from around $17 to a high of $483. That’s how Gill’s $53,000 investment grew to $50 million.
GameStop saw its market cap soar from $2 billion to over $30 billion in a matter of months. Remember, downloading games was the norm, not people visiting video game stores.
The bubble burst
Be careful mixing crypto with real estate - or this could happen
When it comes to real estate, it’s a seller’s market right now. Everyone wants homes, and thanks to the demand, prices are higher than the Empire State Building. At least, that’s how it can feel to folks who can’t afford to buy a house.
$2 loss
For every $1 put toward sports betting. As federal and state guidelines have loosened, fewer Americans are investing in stocks and other safer assets. This past January, folks put $14 billion into online sports betting — compare that to $1.1 billion in January 2019.
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Dating apps have become more popular since the pandemic swept across the globe. With physical interactions out of the question for many, millions flocked to online apps to meet new people and possibly a love interest.
Crypto crash is far from over
Are you still investing in cryptocurrency? Listen to this one-minute podcast for a few reasons why you need to strap in your seatbelt.
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Thousands of crypto accounts drained - Don't make this money mistake
When cryptocurrency came about, few people thought it had any value. Today it’s an integral part of many people’s investing strategies. Crypto like Bitcoin and Etherum have continued to soar in value. Tap or click here for 12 questions you’re too embarrassed to ask about Bitcoin.
Google just banned 8 dangerous apps - Check your phone right now!
The pandemic has caused financial hardships across the globe, and people are seeking to supplement their income. People on the fence about investing are treading into the stock market for the first time, while others are following the cryptocurrency hype caused by social media and public figures.
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The pandemic has changed many aspects of our daily lives. Many people continue working or going to school from home and online retail is still booming.
While some picked up hobbies and learned new languages, others got into investing. Cryptocurrency was an attractive option during the pandemic, as fears of government restrictions on traditional stock trading arose. Social media threw its hat in the ring, driving more people towards crypto. Tap or click here for Kim’s crash course on digital currency.