The DeFi bulls surge higher as the entire crypto space was swamped with comments about the Gamestop saga that is currently playing out in traditional finance as we reported previously in our crypto news.
Gamestop is a video game retailer that was short over 140 percent of the stock’s float by huge hedge funds which expected the stocks to go down. Retail investors on WallStreetBets which is the famous trading subreddit took notice of the trend and started buying on the stock. The stock skyrocketed and culminated in a huge squeeze higher over the past week. Because of this, there was plenty of share short of GME especially those that were holding those positions underwater. Some short holders closed their positions or wait for other entities to bail them out.
Because of the influx of trading demand and uncertainty about the legality and risk of the price action of Gamestop, brokerages started shutting down the trading of GME across the US. This was by far the biggest story of finance in 2021 but crypto investors along with the DeFi bulls took notice of the trend and considered it as sign of on-chain financial application in the future. Economist Alex Kruger noted:
“Great thread on WSB and RobinHood. The problem: the system is rigged. The solution: Decentralized Finance.
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It doesn’t get any clearer than this.”
The total market cap of DeFi is still less than Gamestop $GME.
One is a struggling Dallas-based video game retailer, the other is core infrastructure of a new global, decentralized financial system.
— Santiago R Santos (@santiagoroel) January 27, 2021
The sentiment that the system is “rigged” came after WallStreetBets and the traders started facing issues in using platforms like Reddit and discord and eventually platforms like Robinhood that made is impossible to trade. DeFi on the other hand is seen as a fair option as it doesn’t arbitrate whether the users can or cannot make a trade. Even if the Gamestop saga doesn’t bring a lot of capital into Defi, it could show that this space is about to grow higher.
Not a fan of seeing people shill Defi as a Robinhood substitute here. Same as Bitcoin wasn't ready for Wikileaks in 2010, Defi is not ready for more mainstream adoption. Most projects are not yet censorship-resistant, I say that as a big Defi fan. Give them more time.
— Hasu (@hasufl) January 28, 2021
Gamestop’s market capitalization even got bigger than all DeFi coins that are in circulation. There’s about $36 billion worth of capital in Defi coins now which is only a few percent of the circulating crypto market cap. The sentiment is that DeFi is a strong alternative to the issues of centralized systems but some might not be ready.
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