Welcome to another edition of Qume Market Mondays
Bitcoin
Bitcoin is up 4.91% from last Monday’s peak price. The asset is currently changing hands at the $34,413 price mark. The asset’s price rose to $38,000+ price levels late weekend when Elon Musk updated his status as #bitcoin.
This triggered highest liquidations in the last three months across the crypto markets on the short side.
Bitcoin spot and Futures trading volumes were pumped upwards after the tweet registering the second-highest trading volume registered in January.
The Indian Government is likely to introduce a bill banning crypto trading and other crypto digital assets related financial activities in the country. The Indian government will release a central bank-backed digital currency. This move is likely to hurt established Indian exchanges such as CoinDCX which rose $13M in its series B funding round in December last year.
Bitcoin is likely to have found support around $35,000 price levels and is likely to register some sideways movement throughout the week if no new news breaks out this week.
Gamestop
Over a billion shares of Gamestop were traded in January, spiking its price up by 1,745%. The reason being a traders subreddit called wallstreetbets. This has triggered a short squeeze as hedge funds were short on Gamestop stocks. In the starting Gamestop’s stock was drowning fast until someone on the subreddit noticed that Hedge funds such as Point72, D1 Capital Partners, and Melvin Capital were shorting Gamestop’s stocks. In the event these Hedge Funds have lost 20–50%.
Retail investors from the subreddit thread started to buy stocks of Gamestop in such huge volume that it pushed its piece beyond anyone’s imagination due to which Hedge Funds who were short had to buy the stock to forestall greater losses. This is called a short squeeze.
If you are short on an asset your profits are limited but losses can be unlimited as theoretically there are no limits to how high the price of an asset can climb.
This is seen as market manipulation by many institutional investors and financial advisors on the other hand the people are praising the subreddit group for sticking it to the hedge funds. The trading platform Robinhood is also under scrutiny, it banned retail investors from trading Gamestop stocks. We believe that this was the right move as such mass manipulation holds the financial stability of companies at huge, unprecedented risk.
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