The New York Stock Exchange has once again become the epicenter of a financial drama, with GameStop (GME) experiencing a dramatic surge and subsequent trading halts. This has reignited the debate about whether the stock market is rigged against retail investors. Let’s delve into the events of the past week, revisit the 2021 meme stock rally, and examine the evidence that suggests the market may not be as fair as it seems.
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The GameStop Phenomenon Returns
The week started with a cryptic meme posted by “Roaring Kitty,” the enigmatic figure who spearheaded the GameStop short squeeze of 2021. Roaring Kitty return from a three-year hiatus ignited a frenzy among the Wall Street Bets community on Reddit, propelling GME’s price to a staggering 58% gain on Monday, followed by an additional 85% surge on Tuesday. This triggered a chain reaction, pumping up other meme stocks like AMC and even related cryptocurrencies.
| Day | GME Price Change |
| Monday | +58% |
| Tuesday | +85% |
While the exact motives behind Roaring Kitty’s return remain unclear, the timing coincided with a steady increase in short positions on GME since the beginning of the year. The short interest float, representing the percentage of GME shares loaned out to short sellers, had reached 24% by Monday’s opening bell. This figure is six times higher than the average for a U.S. publicly traded company, suggesting a significant vulnerability that Roaring Kitty may have exploited.
Echoes of 2021
| Year | GME Short Interest Float | Peak GME Price |
| 2021 | 140% | $483 |
| 2024 | 24% | $63.83 (as of 5/15/2024) |
The key difference lies in the current short interest float, which is considerably lower than the over 100% level seen in 2021. This means that while hedge funds may still feel the pain, a short squeeze of that magnitude is unlikely to occur.
However, the energy and enthusiasm of the Wall Street Bets community, which now boasts 16 million members, cannot be underestimated. Their collective power could still fuel further price movements in meme stocks.
The Rigged Game?
The most contentious issue raised by this week’s events is whether the U.S. stock market is rigged against retail investors. The New York Stock Exchange halted trading on GME and AMC over 50 times this week, ostensibly to curb excessive volatility. Yet, this action conveniently protected hedge funds with significant short positions, raising suspicions of collusion between Wall Street institutions and market regulators.
While a free market would allow prices to fluctuate freely based on supply and demand, the frequent trading halts paint a different picture. They suggest a system where institutions have the power to manipulate the market in their favor, leaving retail investors at a disadvantage.
Conclusion
The GameStop saga has once again exposed the potential for manipulation and unfair practices in the U.S. stock market. While it may not be possible to definitively prove that the market is rigged, the evidence suggests a system that is far from fair and transparent. As retail investors, it’s crucial to be aware of these realities and approach the market with caution.
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FAQ Related To GameStop Stock Market Scam
A short squeeze occurs when a heavily shorted stock’s price rises sharply, forcing short sellers to buy back the shares they borrowed to cover their positions. This buying pressure further drives up the price, creating a feedback loop that can lead to massive losses for short sellers.
Wall Street Bets is a subreddit on Reddit where retail traders discuss stocks, options, and other financial instruments. The community gained notoriety for its role in the 2021 GameStop short squeeze.
While it’s difficult to provide a definitive answer, the events surrounding GameStop suggest a system where institutions have undue influence and retail investors face significant disadvantages. The frequent trading halts and the potential for collusion between Wall Street firms and market regulators raise serious concerns about fairness and transparency in the market.
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