The 2021 GameStop saga, recently featured in a Netflix movie, may have unexpected parallels with Bitcoin, particularly in the context of a potential supply crunch.
Echoes of the Reddit-fueled’ mother of all short squeezes’ (MOASS) for GameStop, in Bitcoin’s context, could manifest as a significant supply squeeze, or ‘Bitcoin Mother Of All Supply Squeezes’ (Bitcoin MOASS.) I’ve referenced this in several articles this year, but I wanted to break down exactly why I think this could happen.
To understand this better, let’s revisit the GameStop phenomenon.
I wasn’t early enough to follow Roaring Kitty through his initial thesis on GME at around $3 per share. However, I was active within the WallStreetBets subreddit, and by the time the stock hit $13, it was hard to ignore his daily updates. Around the $50 (pre-stock split) price, I cracked and ‘YOLOed’ in and took the ride up to $500, determined to hold for the moon or bust. Ultimately, I bust, but I enjoyed being a part of something.
GameStop short squeeze thesis basics.
For those unfamiliar, GameStop shares were heavily shorted by several hedge funds who saw easy prey in a retail store headed for bankruptcy with the added pain of the pandemic. Seemingly, the goal was to short the stock to zero. This strategy, often employed against faltering companies (like Blockbuster before its demise), is essentially betting on the company’s failure.
However, hedge funds underestimated the attachment many gamers had to the GameStop brand and the power of retail investors uniting behind a cause. There was also a more philosophical aspect to why many investors, myself included, purchased shares related to the broken traditional finance system. As a Bitcoiner, this message resonated with me, and I bought shares intending to HODL ‘to the moon.’
Long story short, retail investors, mainly through Robinhood (but also all around the world,) actively piled in, buying GME shares aggressively in the hope that it would force the hedge funds to close their shorts at higher prices and trigger a short squeeze. This tactic did inflict significant losses on some hedge funds, although many had the financial buffer to absorb these losses.
The lack of real-time short-interest reporting further complicated matters. Hedge funds were able to close their short positions without the knowledge of retail investors, perpetuating the short squeeze narrative and leaving it unclear whether all short positions have truly been…