How r/wallstreetbets were able to turn around the stock market
Out of all the subreddits on reddit.com, the one which has sparked the most controversy has most definitely been r/wallstreetbets. The subreddit was created on January 31, 2012, when u/jartek was kicked out of r/investing. This server hasn’t had any problems in its first five years, with proper investors joining and helping around with investment tips. That changed around 2017 when “trolls” started joining and changed the course of the server. Fewer investment posts were being made, and more and more memes were being posted. Eventually, all the investors left the server and left all the “memers” and newbies to the stock market behind.
This would be the start of what is known as the “dark age” of the server.
The server members wanted to actually start investing, but they needed an investment app to do so. Naturally, they chose RobinHood, which has a reputation as one of the worst trading apps possible. This is because of all the bugs and hacks possible on it. These bugs included an infinite money glitch, where you could manipulate the RobinHood server to double your money for as long as you need it to.
A lot of users used this glitch to get some money, which then caused the RobinHood Reddit account to make a post on them banning any members from RobinHood who would do that.
u/RobinHood was banned the next day from the subreddit. Things got so heated on the subreddit, that news outlets such as Bloomberg began to report on it.
The server members also had a reputation for being risky when it came to trades, maybe a bit too risky.
Whenever a user described their plan on the subreddit, they were shut down and laughed at by fellow users, often with heated words (as was commonplace on the server), whereas the poster would say that the plan was foolproof. Most of these plans failed This gave the server a poor reputation leading YouTubers to make videos on the sheer pandemonium happening on the server. The most notable of these videos was from Big Boss, whose video has 3.3 million views as of the day I am writing this.
However, by late 2020, the future had brightened.
The Gamestop Age
In the latter part of 2020, the server started receiving more experienced traders, and this was a critical change of the subreddit. These reddit users started to post about investing in companies which were in financial trouble, such as GameStop and AMC.
These 2 particular companies were hit really hard by the coronavirus pandemic. Because everyone was forced to stay at home, people weren’t allowed to go outside to buy video games (GameStop) or go to the cinema to watch the latest movies (AMC). Both of these companies, however, were already in financial trouble before lockdown, and COVID-19 was just adding insult to injury.
In fact, the situation was so bad that full-time traders started shorting against these companies.
To explain it simply, shorting a company means you pay money predicting that the stock of the company will go down. That means the trader will earn however much money the company will lose compared to the amount they paid for it.
Because GameStop was being shorted left, right and centre, it was predicted that the company would go bankrupt by the end of the decade. This would have happened, had it not been for r/wallstreetbets.
The subreddit did have some traders who bought stocks of GameStop, expecting it to go up. And as more and more people from the subreddit started investing in GameStop, the stock of the company went up. That situation was a win-win for GameStop and the redditors, as they both gained money from it. However, for the traders who had shorted against GameStop, the situation was getting dire.
In short, you have a period of time in which you need to pay back the short. If the stock went down, the trader gains money. If the stock went up, the trader had to pay some of their own money. Because GameStop’s stock had gone up drastically (starting the GameStonks meme), the traders had to pay a lot of money, sometimes reaching thousands of dollars.
This was a golden age for r/wallstreetbets. They had saved companies from bankruptcy, whilst making an easy buck out of it. Right now, the subreddit has more than 7 million members, more than 10 times what it had less than one year ago. It has grown in popularity, attracting more and more new people to the stock market.
What the subreddit has done is great, and for many people, this was a great way to start trading. It is also one of the best redemption arcs on the internet, being up there with the redemption of Logan Paul. However, there will always be haters on the internet, and r/wallstreetbets is no exception to that.
Of course, the traders are angry. They had lost a lot of money because some Redditors had teamed up against them. Well yes, as true as this might be, the traders have to remember one thing. The stock market is available to anyone, including regular joes like you and me. We can download an app on our phone or go to a website on our computers like ‘etoro’, create an account, and invest in the market. If a lot of people team up to do this, the stock market will obviously change.
I now ask you, the reader, to think about this. Are you on the side of the redditors or on the same side as the traders. Whilst yes, r/wallstreetbets have changed the course of the economy, they have also manipulated it, and have a shady past. But even if you are on the side of the traders, they encouraged ordinary people to invest in the market, which later turned out to be to their detriment.
First Image by © Alex Proimos
Second Image by © Mike Mozart
Cover Image by © Beraldo Leal