This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Reddit Investors Who Played GameStop Are Now Upvoting Silver

By:

CEO and Chief Investment Officer

Those of you with kids and grandkids may at some point have stepped inside a GameStop. If so, you might be familiar with the video game retailer’s tagline: “Power to the players.”

The same slogan could just as easily be the rallying cry for the millions of millennial and Gen Z Reddit-users who took to Robinhood last week to drive up the share price of the beloved yet struggling GameStop.

(Fun fact: Ross Perot was one of the earliest seed investors in GameStop’s predecessor, Babbage’s, which first opened its doors in Dallas, Texas, in 1984.)

By now you’ve likely heard the full story. But just in case: A number of hedge funds, including Melvin Capital and Maplelane Capital, took out short positions in GameStop, whose sales were lagging even before the pandemic killed foot traffic. In response, anti-Wall Street organizers on Reddit urged readers to buy GameStop options en masse to catapult its shares “to the moon.” This in turn forced Melvin and others to buy GameStop shares at much higher prices to cover their positions, leading to multibillion-dollar losses. According to reporting by the Wall Street Journal, Melvin lost more than half on its investments in January.

GameStop, meanwhile, surged from around $19 a share to $325—a more-than 1,600% increase. The stock traded a head-spinning $100 billion worth of shares last week, more than Apple and Amazon, according to Bloomberg’s Eric Balchunas.

To traders who genuinely care about the company’s survival, I would suggest they consider supporting it by spending their money there this weekend.

The Reddit-fueled rally has drastically impacted price discovery in not just GameStop but other underdog stocks as well. Shares of movie theater operator AMC Entertainment, home goods retailer Bed Bath & Beyond, BlackBerry and Tootsie Roll Industries have also popped. Even Blockbuster’s liquidation holding company saw surreal levels of trading, its daily volume jumping from zero just a month ago to nearly 24 million shares on Thursday.

blockbuster stock

Today, the price of silver also surged on the back of Reddit forums, touching an eight-year high of $30 an ounce in intraday trading.

Gil Scott-Heron, considered by many to be the first rap artist, informed us back in 1971 that “The Revolution Will Not Be Televised.” 

That may be so, but it will be tweeted, shared on Instagram, upvoted on Reddit and traded on commission-free Robinhood using decentralized Bitcoin and Ethereum. “Power to the players” indeed.

In Support of Democratizing Capital Markets

No matter where your opinion falls in all of this, you can’t deny that it’s historic. To my knowledge, nothing like this has ever happened before in capital markets, where millions of small traders, many of them using their $600 stimulus checks, worked in tandem to cripple wealthy institutional investors, leveraging their very own trading strategies against them.

Metro-Goldwyn-Mayer (MGM), in fact, has reportedly acquired the film rights to an as-yet unpublished book about the Reddit-GameStop saga. The book’s working title? The Antisocial Network.

In the process, a number of GameStop traders have made life-changing amounts of money.

Let me be very clear: I’m in favor of Robinhood’s mission to democratize capital markets and finance, but like democracy itself, things can sometimes get messy. What the Redditors are doing is not investing. This isn’t the same as Robinhooders buying airline stocks last May after Warren Buffett dumped his positions in the big four carriers.

It isn’t even speculation. It’s activism—think of it as a type of anti-Wall Street “Arab Spring”—and I fear that some young people may get hurt when the bottom falls out.

Robinhood clearly felt the same when it halted trading in some of the heavily shorted stocks (and, on Friday, as many as 50 other stocks). The online broker, whose tagline is “Investing for Everyone,” tried to clarify its decision in an email last week, saying the temporary restriction “was not made on the direction of any market maker we route to or other market participants.”

Robinhood also emphasized its longstanding mission to open the capital markets up to a greater share of people, including younger and nontraditional investors: The past year in particular has shown us that the financial markets are for everyone—not just institutional investors and hedge funds… Democratizing finance for all means giving more people access, not less.

Dalio: Bitcoin Is “One Hell of an Invention”

That brings me to Bitcoin, Ethereum and the crypto ecosystem in general, which is likewise helping to democratize finance. When you use a card to pay for your Starbucks, there’s a third party standing between you and the transaction. With Bitcoin and Ethereum, payments are peer-to-peer, open and free to move across borders.

For this reason and more, Ray Dalio last week called Bitcoin “one hell of an invention.”

In a blog post dated January 28, the Bridgewater founder wrote that it’s an “amazing accomplishment” that Bitcoin has been “rapidly gaining popularity as both a type of money and a storehold of wealth.” He added that, to him, Bitcoin looks like an attractive long-term option that he could one day put money in.

Dalio’s comment, I believe, underscores the reality that cryptos are rapidly going mainstream—as an investment, as stores of value and as currencies. It’s no longer just speculators who are participating, but well-known, highly respected investors and organizations.

The week before last, in fact, inflows into cryptocurrency funds and products hit a new record of $1.31 billion, according to CoinShares. So far this year, Bitcoin has seen average daily trading volume of $12.3 billion, up significantly from $2.2 billion last year.

Another sign that Bitcoin is growing in popularity: The number of Bitcoin wallets that contained a positive balance reached a new record high in 2020, according to Coinbase’s 2020 in Review. An estimated 33.2 million wallets held Bitcoin, an increase of 16.8% from the previous year.

number of bitcoin holders

The Rise of DeFi, a Competitor to Traditional Financial Services

Decentralized finance (DeFi) also continued to grow in 2020. In short, DeFi has the potential to completely upend the traditional financial services industry by providing “global, programmatic, decentralized, 24/7/365 markets” for services as various as taking out loans, investing in derivatives, trading assets and buying insurance contracts. For the first time, financial product development has been put “directly in the hands of engineers, who no longer need to work at a bank and ‘ask permission’ to create products.”

According to Coinbase, there were 1.2 million DeFi users around the world taking advantage of these open-source systems.

Defi users

I think one of the biggest signs that open-source technology is giving traditional finance a run for its money is that, today, a single Bitcoin is enough to purchase between 100 and 150 shares each of the big four U.S. banks. Compare that to five years ago, when one coin could only buy you about one share each.

bitcoin shares value 2021

We Were Early in the Crypto Ecosystem

Having said all that, I couldn’t be prouder to have helped bring HIVE Blockchain Technologies to market more than three years ago. It remains the only crypto miner that mines both Bitcoin and Ethereum.

Today, I’m pleased to say that HIVE ranked number four on the 2021 OTCQX Best 50, a ranking of top performing companies on the OTCQX Best Market based on 2020 total return and average daily dollar volume growth.

Originally Posted on February 1, 2021 – Reddit Investors Who Played GameStop Are Now Upvoting Silver

Please note: The Frank Talk articles listed contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Mr. Holmes owns shares of HIVE while U.S. Global Investors owns convertible securities. Effective 8/31/2018, Frank Holmes serves as the interim executive chairman of HIVE.

Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (12/31/2020): Amazon.com Inc., Apple Inc., Starbucks Corp.

Disclosure: US Global Investors

All opinions expressed and data provided are subject to change without notice. Holdings may change daily.

Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

About U.S. Global Investors, Inc. – U.S. Global Investors, Inc. is an investment adviser registered with the Securities and Exchange Commission (“SEC”). This does not mean that we are sponsored, recommended, or approved by the SEC, or that our abilities or qualifications in any respect have been passed upon by the SEC or any officer of the SEC.

This commentary should not be considered a solicitation or offering of any investment product.

Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.

Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by clicking here or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from US Global Investors and is being posted with permission from US Global Investors. The views expressed in this material are solely those of the author and/or US Global Investors and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Hedge Funds

Hedge Funds are highly speculative, and investors may lose their entire investment.

Disclosure: Forex

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.

Disclosure: Bitcoin Futures

Trading in Bitcoin futures is especially risky and is only for clients with a high risk tolerance and the financial ability to sustain losses. More information about the risk of trading bitcoin products can be found on the IBKR website.If you’re new to bitcoin, or futures in general please visit CME Bitcoin Futures.

PLEASE NOTE AT THIS TIME INTERACTIVE BROKERS PROVIDES LIMITED ACCESS TO CRYPTO-RELATED PRODUCTS. ELIGIBILITY TO TRADE IN CRYPTO-RELATED PRODUCTS MAY VARY BASED ON JURISIDICTION.  TRADING IN CRYPTO-RELATED PRODUCTS IS ESPECIALLY RISKY AND IS ONLY FOR CLIENTS WITH A HIGH RISK TOLERANCE AND THE FINANCIAL ABILITY TO SUSTAIN LOSSES.

Disclosure: Margin Trading

Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment.

For additional information regarding margin loan rates, see ibkr.com/interest

Disclosure: Options Trading

Options involve risk and are not suitable for all investors. For more information read the Characteristics and Risks of Standardized Options, also known as the options disclosure document (ODD). To receive a copy of the ODD call 312-542-6901 or copy and paste this link into your browser:

http://www.optionsclearing.com/about/publications/character-risks.jsp

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.

trading top