Banking democratization demonstrated by the GameStop saga

04.03.2021

Recently the world has been following the story of the Reddit rally where amateur traders propped the stocks of GameStop Corp. (GME), AMC Entertainment Holdings, Inc. (AMC), and other companies. We all have been watching them taking on professional investors and enjoying the satisfying revenge. To describe the situation more accurately it would be correct to mention that hedge funds have also received their benefits from this mania.

Lessons learned

Yes, primarily this situation showed us that retail investors have an ability to put together their resources and knowledge for fighting the big sharks. But also, the episode taught us that the interests of retail investors are not taken into consideration by the financial markets’ rules. The popularization of cryptocurrency and better access to financial education are bringing investment opportunities that are more even for everyone, yet greater systemic inequities still exist. Many prominent investors and investor education advocates agree on that.

Worrying about the future

Ultimately, after the GameStop drama follows the prediction of the democratization of economics offered by the internet. Thanks to this kind of accessibility, the banking systems will probably be significantly democratized by crypto in some time.

Another disturbing issue is the apprehension that the GameStop madness can be a part of a bigger problem: the growing inequality of wealth distribution in society. It has been noted countless times that capitalism as a system does not serve good to many members of our societies. Not to forget that individual investors need additional protection measures.

To investigate whether cases as the GameStop rally contribute to the global problem, the U.S. Securities and Exchanges Commission (SEC) is studying the situation and all the parties involved. During the meeting held by SEC, Commodity Futures Trading Commission, and the Federal Reserve Janet Yellen, the new Secretary of the Treasury, emphasized the importance of the functioning and efficient financial markets as well the protected investors. The recent market volatility connected with GameStop is disturbing the financial regulators.

Investment prognosis

Not many investors believe that government agencies are able to make quick changes for adapting the financial system. The fact that it is not functioning well additionally fuels the interest in cryptos and the growth of the cryptocurrency market. Google searches on buying crypto do not seem to stop and only beat the old records.

After seeing the Robinhood’s reaction in the GameStop case, many became interested in decentralized platforms. While the lawmakers are slowly trying to examine one case at a time, the new investors learn that by choosing a decentralized cryptocurrency they enter DeFi where is no centralized entity to control their money. Instead, investors are in control all the time.

Do investments or cryptocurrencies seem interesting but out of reach for you at the moment? It is the best time to get advice from our specialists in COREDO.

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