Reddit's market disruption and volatility continues with new instruments

February 02, 2021 14:00

For a week now, the hottest topic on the market has been the disruption taking place between the well-known Reddit forum r/wallstreetbets and the Wall Street giants. This disruption has caused the largest “short squeeze” in recent years, eliminating billions in funds in held short positions due to the sharp increase in the price of assets held by this group of small investors.

In the beginning, the battlefield was centred on GameStop (GME), which is an American multi-channel retail video game company which, due to the crisis generated by the coronavirus,  was on its way to bankruptcy due to the dependence it has on the income generated by sales in its physical stores due to its large network throughout the world.

In just a few days, GME went from trading just under $ 20 to over $150 per share, and this momentum was reinforced when Elon Musk entered tweeted the meme “Gamestonk!!” while linking to the Reddit channel, leading the price to hit the stratospheric figure of $480 per share within moments, although during the last few trading days the volatility has been very intense, and is currently trading at around $222 per share.

Source: Admiral Markets MetaTrader 5. GameStop daily chart. Data range: from October 7, 2019 to February 2, 2021. Prepared on February 2, 2021 at 12:00 CET. Keep in mind that past returns do not guarantee future returns.

Price evolution in the last 5 years:

  • 2020: 209.87%
  • 2019: -51.82%
  • 2018: -29.69%
  • 2017: -28.94%
  • 2016: -9.91%

After GME, Reddit turned their attention to other instruments, such as AMC and silver.

In the case of AMC, the increases have been less spectacular than in the previous case, but there have also been strong increases in a few days, taking the price to exceed 20 dollars from 5 dollars.

In the case of silver, the precious metal initally reached $30, causing some brokers to restrict precious metals trading, causing problems in that market. However, it seems that they are not able to substantially impact this market, as it seems too large for these retail customers to affect it in a prolonged way. Because of this, we have already seen sharp falls, reaching the upper band of the lateral channel that we have been following for the last few weeks.

Source: Admiral Markets MetaTrader 5. Silver daily chart. Data range: from October 30, 2019 to February 2, 2021. Prepared on February 2, 2021 at 12:20 CET. Keep in mind that past returns do not guarantee future returns.

Price evolution in the last 5 years:

  • 2020: 47.66%
  • 2019: 15.20%
  • 2018: -8.57%
  • 2017: 6.34%
  • 2016: 15.08%

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