Gamestop, Reddit, and Wall Street. Who would have thought these three names would somehow be connected? 2021 has barely begun, and it sure has brought surprises. Many are confused about what went down in the world of stocks. 

Following a similar trend as a few other companies, Gamestop’s stock price shot up from $18 to $347.51 in a matter of weeks. This large a jump is extremely uncommon, and it rattled the investors of Wall Street. Why did this happen?

It all started with the hatred of hedge funds, Wall Street, and the top 1%, who often get the best hand over the stock market due to unfair means. Novice investors decided that it was finally time to usurp this long-standing superiority. This is where Reddit comes in, more specifically a group called “WallStreetBets,” where members chat about the next big trade to jump on and encourage each other to take risks. Recently, there was much talk about pushing Gamestop’s stock “to the moon.” This, along with “shorting” the stock, caused it to rise by more than 1000%. 

Shorting is how the big investors make money off of a stock falling and is a controversial method. In this case, they buy a share of Gamestop and then sell it. If the stock price then does as they expect, they can buy it back at a lower price and keep the difference. Sounds slightly sneaky, right? Gamestop is one of the most heavily shorted stocks in the market, and when a rise in price occurs for such a stock it can force the short sellers to get out of their bets. In order to do this, they must buy the stock to cover their losses, pushing the price even higher and creating a loop. This is known as a “short squeeze.” The more Gamestop’s short sellers got squeezed, the more smaller and first-time investors urged each other to keep driving up the price. Along with the hedge funds, this did not bode well for Gamestop itself.

Such an event has raised several important questions. Many experts agree that amateur traders need to be educated about the risks of overzealous trading. Should a new, novice generation of traders be allowed to enter the market with such an immense presence?  Technology has certainly made this easier, with people being able to trade right from their phones through apps such as Robinhood, and this seems risky to outsiders. However, many are overjoyed, saying such defiance of the big investors of Wall Street was long overdue. It remains to be seen if any changes will be made in the world of stocks.