3Apr

Sika and Mawuli’s Take on How the Gamestop Scandal of 2021

We started this specific blog because we were inspired by what had happened with Gamestop. So for those who are not familiar with what happens, here’s a quick rundown. There was a hedge fund on Wall Street that was trying to short Gamestop. This means, they were betting against Gamestop– Basically making a lot of money off of betting that Gamestop would go down in value within a given time. They would make a lot of money off of that. So they bought a lot of put options, meaning they were hedging their bets that Gamestop would go down in value. People on Reddit, I guess people in a specific subReddit, heard about this and got really pissed. They basically went on Robinhood and bought a bunch of Gamestop and actually forced the price up causing the hedge fund to lose money (as well as their minds). It was poetic.  

There was a whole fiasco/ fallout. After that Robinhood actually stopped people from purchasing any more Gamestop stocks via their app. I believe right now they’re under investigation for accepting some monies that were taken from the hedge fund. So it’s a whole sort of interesting saga that continues to unfold. So we don’t want to get too deep into the weeds with that. I think what we want to talk about is how does all of this, all of what is happening, where information is becoming more liberalized people who the pandemic have, has kind of forced those of us who really don’t pay attention to some of this stuff because we’re bored to start paying more attention. More people are sort of talking, collaborating, reading, and basically sharing information online. So it seems like there’s a real sort of rich conversation that’s happening online. And I would like us to make the connection between what happened with Gamestop and what we have just laid out with crypto. The way this connects to crypto is that the situation, in my opinion, ended up driving a lot of people towards crypto because crypto is designed to be permissionless. It turns out the GameStop, the hedge funds that were manipulating the price. We’re also heavily invested in Robinhood. So just by the pickup of a phone call, they were able to get Robinhood to disable the “Buy” button for GameStop, which was very scandalous because people have their money in the market. They’re trying to make money for trying to not lose money and you disabled the “Buy” button and now they are stuck. And at the same time, the hedge funds are trading the GameStop just fine. So a lot of people wind up moving to crypto because of that like we’re just talking about Uniswap. It’s a smart contract built on top of Ethereum.

So let’s recap what altcoins are for our public. So we’ve discussed Decred and Ethereum.  Let’s take our reader through what those are again and then the altcoins built on top of the actual Ethereum infrastructure, which are Maker and Uniswap. An altcoin is just an alternative coin to Bitcoin. Since Bitcoin came first and still has about 70% market dominance. The price of Bitcoin is approximately $60,000 (March 18, 2021). Whereas the next highest one Ethereum is at about $1,800. So everything else is an alternative to Bitcoin. That’s why any cryptocurrency outside of Bitcoin is called an altcoin. Decred is designed and inspired by Bitcoin. It has 20 more million coins just like Bitcoin. The difference here is there is actually an automated governance structure. Every transaction that a user makes in that system, they take a cut, which goes into a development fund. As of writing this blog right now, there are about a hundred million dollars for development––paying developers, doing marketing, whatever they need to do. It just shows you that the coin will never die or suffer from a lack of innovation.

Bitcoin right now runs sort of on donations from companies in the industry, which is not acceptable for something so important. So that’s Decred. Their governance structure is all automated. They even vote throughout the coin. People who will hold the coin can vote and they get interested in that. And all of that just ensures that the coin will never die or suffer any kind of loss. The next one, Ethereum, is designed to be programmable Bitcoin, but really the thing you can compare it to in the real world is like the stock exchange. It’s a place where all the other coins come to meet and it uses a technology called smart contracts. We don’t have to get into that right now, but the most important thing is the state of Ethereum right now is it’s looking like a stock exchange. A lot of coins on top of Ethereum, even though Ethereum itself is a coin. One side effect of that is the price of it keeps going up because all these other coins find very innovative ways of building products and performing. But if you run an Ethereum, people have to buy Ethereum to access your products. So it causes the price of Ethereum to keep going up. 

So what Ethereum offers that cryptos like Bitcoin don’t offer? 

Now let’s delve into why Ethereum is attracting so much attention, namely, it’s creating its own sort of ecosystem within the crypto exchange markets. So Bitcoin initially brought out the whole innovation of programmable money. However, the stock at that point didn’t go further. Ethereum took that and ran with it and basically said, if we can have programmable money, we can also have what they call smart contracts or programmable contracts of any sort that can resolve themselves. And so people use that programmable smart contract to build things like Uniswap. You know, it’s an exchange that says if you have Ethereum and, say you want X coin, you send it to this address and automatically it will send the coin you need to, the other address you don’t even deal with a human being is just a contract that can react intelligently. We’ve given a high-level overview of  Decred, Ethereum, Maker, and Uniswap. Let’s talk about how all of this comes together. 

What that means is as long as you have Ethereum when you knock on the door, it’s going to open it’s, it’s a, it’s a contract. It doesn’t discriminate. It doesn’t care. You know, whether you have money or you don’t, it doesn’t matter whether it is a hedge fund manager or not. If you have Ethereum and you’re trying to say, Oh, buy me this other coin, you Uniswap will let you buy it 24/7. Nobody’s gonna disable the button for you or cut it off because it’s decentralized. If the block one, if the block one site it’s available on 10 other sites. So that’s, I guess that was one of the shining moments of crypto, the fact that you can trade 24/7, you don’t have to wait because in the games of games, top situation, you have to wait every day. When they close the stock market, you have to wait till the next day to trade. Whereas on crypto, you can trade 24/7 because it’s running literally everywhere at the same time. Because there is no “disable button” people are driven more to crypto because they realize nobody can ever block you from trading in the crypto ecosystem.

Great. So let’s kind of bring this all together in terms of talking about crypto. I guess, in some ways, liberalizing the investment markets. We have spoken many times about the disconnect, especially when it comes to women, in general, people of color, immigrants, and even boomers who, you know, may have some acumen when it comes to stock markets, but really are struggling with this concept of cryptos. So let’s kind of wrap this up with a neat bow by really going back to why are we doing this? Because even though we know that, you know, the folks on Reddit have sort of migrated over to the crypto markets, it’s still a pretty small, pretty not very diverse group of folks. We want to make sure that we are spreading the knowledge and the wealth and the possibilities that this specific investment frontier really offers. 

Crypto stands to help most people who are sidelined by the existing financial system or discriminated against for one reason or the other because what we’re talking about here is software that is designed to be censorship-resistant. So if for any reason or the other, the mainstream system does not like you or in the case of black people for historical reasons, the mainstream system works against you. Then things like crypto give you a possibility that never existed before basically financial freedom in the sense that now, even if it’s just a dollar, you can now self custody that dollar, invest that dollar and have a very bright, a very bright financial future in terms of returns. We’ll talk later about the returns of the crypto versus the traditional markets. But yeah, this is about financial freedom and inclusion. 

Disclaimer: The information on this website and all associated literature are for educational and informational purposes. It does not constitute a fiduciary duty or obligation between Amewusika “Sika” Sedzro and you. Please consult your financial and investment professional for your specific situation.

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