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GameStop, Goliath, Crypto Craziness and a Golden Nugget: Part 1

Jan 29, 2021

GameStop, Goliath, Crypto Craziness and a Golden Nugget: Part 1

The past week in crypto, twitter, reddit and securities spheres is historic on a number of levels. The old saying you can't make this stuff holds true once again. 

I always say my life would be boring it wasn't for crypto and blockchain. The entertainment value is better than a sports and soap operas combined. If this week was a football game it would be one of those instant classics. 

Read on,..

Let's start with the David vs. Goliath drama...

I was a few days behind on the Gamestop stock runup over the past week or so but got caught up yesterday. 

I was thinking this is like a soap opera. For those who are not aware I'll summarize as succinctly as possible. Here we go in 9 points...

1) WallStreetBets, a subreddit group, with about 5MM members who share trading strategies etc. Wall Street hedge funds were taking short positions on GameStop because the company with struggling with its retail heavy business but with a strategy to go more digital. 

2) WallStreetBets members had been discussing GameStop stock going back into mid 2019. Then Robert Cohen, Chewy co-founder, acquired a large stake in GameStop and hedge funds were going in for the kill with short sale positions essentially betting on the company's failure. 

3) This didn't resonate well with WallStreetBets members and a digital style Occupy Wall Street buying frenzy ensued pushing the price from $14 to a high of $350 in 30 days. 

4) Retail investors made millions, Robert Cohen's GameStop stake became worth billions and the hedge funds got backed into a short squeeze corner. 

5) This David and Goliath battle forced the hedge funds to get bailed out from their Wall Street buddies while their billion dollar losses got transferred to Cohen and the army of retail investors. 

6) Meanwhile, Robinhood shut down trading, Nasdaq is keeping a close eye to shut down its valve and Congress is calling for hearings on the matter. 

7) But wait, there's even more. Elon Musk changed his twitter bio to include bitcoin...

...then BTC goes on a major rally giving the same short squeeze to bitcoin short sellers forcing more than $300MM of liquidations. 

8) DOGE, a coin whose value proposition is basically a meme, saw an 800% rise to a record price in 2 days fueled by the same frenzy.

9) This is rather legendary to say the least which is why I call it an Instant Classic to borrow the sports term. Wall Street is going to make a heavy press back in a number of ways because they won't sit idle with billions at stake. 

The investment world moved into another dimension. 

Here are some headlines about the story:

How Reddit posters made millions as Wall Street lost billions on GameStop's wild stock ride

Elon Musk-Prompted Bitcoin Price Surge Causes Liquidation of $387M in Shorts

Hot DOGE! Meme-Based Cryptocurrency Soars More Than 800% to Record High

In the next blog we'll dive into Part 2 and then get to the golden nugget...

Good luck and remember your goal is a always a Crypto Bullseye™

DISCLAIMER: The information in this newsletter can not be construed as tax advice because tax advice can only be dispensed with an official engagement letter. 

Yours in Crypto, 

Kirk Phillips, CPA, CMA, CFE, CBP