March 1, 2021

Cryptheory

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Bitcoin and Ethereum Rebound As Wall Street Rocked by GameStop

3 min read

It was a quiet day in crypto (compared to Wall Street anyway) as major cryptocurrencies like Bitcoin and Ethereum appear to have finished correcting

Bitcoin, which hit lows of $30,458 on January 27, bounced back confidently above $31,000 and appears to be trading steadily. 

Ethereum’s price mirrored that of Bitcoin’s, with lows on Wednesday followed by a bounce back. For the first time this week, most of the projects in the top 20 are back in the green, with the biggest gains coming from Chainlink up 6.6%, Uniswap up 7.5% and AAVE up 6.4%. AAVE and Uniswap have racked up back to back gains for a week now as DeFi continues its hot streak among investors.  

The increasing sophistication in products and services appear to be what’s driving DeFi’s resurgence. Just yesterday, a report on trends in DeFi appears to suggest that tools traditionally found in big banks are now trickling into the decentralized space. 

Tranching Helped Fuel 2008 Financial Crisis. Now It’s Coming to DeFi

One in particular has got pulses racing: tranche lending. This tool, which many have suggested was the reason the 2008 financial crisis was so bad, is being used by a select few companies to help compile the dizzying array of lending and liquidity pools swirling around DeFi into accessible products. 

 

While these products are still being developed, the interest rates being offered in decentralized finance – not to mention access to governance tokens of the companies facilitating the swaps – are fast becoming the most consistent way to make money while the broader crypto markets are buffeted by volatility. 

Dow and S&P 500 have worst day in 3 months 

It was a different sort of day on Wall Street. The Dow, S&P 500 and Nasdaq, were all down for what has been documented as the biggest drop since October 2020. 

On the S&P 500, communication, services, financials and healthcare were among the biggest losers on the stock markets today. Disney, Maerck and Boeing performed the poorest in the Dow with 4% losses each. 

Discord Bans WallStreetBets, the Group That Boosted GameStop

The Nasdaq was down 2.5%, with Netflix down 6.2%, PayPal down 4.65% and all other big tech stocks taking a hit. 

The big talk on Wall Street is GameStop and the short squeeze that redditors over on WallStreetBets have brought to hedge funds. The story is a modern day, decentralized David versus Goliath. A group on Reddit identified that large hedge funds were shorting GameStop, a company that sells physical computer games in shopping malls in America in order to make a profit. 

However, a group of investors on Reddit, and until yesterday, Discord decided to enter the market and force the price of the stock up, leaving the hedge funds having to cover their losses to the tune of $100s millions of dollars. 

In 2006, when the company had a successful business, the stock was worth just $50. As of writing, with the company’s stores all but closed and the digital download space destroying profit margins, the company’s share price is worth $347. 

Regulatory bodies like the SEC are looking to see if the response could be classed as a pump and dump scheme, but right now Wall Street is rattled and retail investors involved in the scheme are laughing all the way to the bank. 

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