The beginning of 2021 was a period when the level of irritation among small speculators reached its zenith. Individual investors finally decided to clench their fists and bang them on the table. This proverbial blow was strong enough to shake the financial markets and lead the so-called big players to have to flee the market and book losses.
“Kids” vs. Wall Street funds
Probably everyone who is at least a little bit interested in the capital market has recently heard about the GameStop company. Its shares rose by over 2 311 per cent in just 11 trading sessions between 13 and 28 January this year, thus extending the range of its appreciation since April last year to almost 18 700 per cent.
At the beginning of April 2020, one share of GameStop, a US company selling video games, consumer electronics and gaming accessories, was worth USD 2.57. On 28 January, however, its share price soared to US$483, and although today it sits below US$47, even this temporary increase was enough for small speculators to show the big players that they too have something to say.
The Street reversed the trend on GameStop
GameStop is, of course, an example of one of the many companies whose stock price has seen such reactions in recent times. First, the share price rose rapidly, only to fall back just as rapidly. This action is commonly referred to as short squeezing, and is aimed at leading investment funds to incur losses.
When observing dynamic increases in the prices of some companies, some investors come to the conclusion that these securities do not deserve such a high valuation. They decide to take short positions ( betting on falling prices).
According to Bloomberg data, the number of shares “played short” at one point exceeded the number of all GameStop shares that were freely traded. Thus, the company was one of the most heavily “shorted” in the US. Simply put, the company was overvalued in the eyes of many investors, including funds, and with its poor prospects they were betting on a decline in the company’s price.
At one point, however, the online forum WallStreetBets came up with the idea of using this opportunity to show institutional investors that the Street also had something to say here. To this end, small speculators encouraged other players to buy GameStop shares. This action contributed to a noticeable increase in the company’s stock price, which in turn forced institutional investors playing short to give up and close their positions with losses.
One of the biggest victims of this shortsqueeze is the Melvin Capital fund, which lost 53 percent of its capital in January alone. So you could say that small investors massacred a powerful fund.
Short Sqeeze with problems
Citing the history of short sqeeze on GameStop shares, one cannot also ignore the aspect of technical problems that speculators encountered. The platforms they used to conclude transactions suspended the possibility to buy selected shares, which prevented further pumping of the balloon.
Another obstacle was the anonymity of individual members of the WallStreetBest forum for small speculators, which made it impossible for the organizers of the action to know who was really a trader and who supported the squeeze out of short positions and who was just making artificial noise.
Rafał Zaorski comes to the rescue
In order to solve these problems, Rafał Zaorski decided to create $BSB Coin, a token that will improve cooperation between investors and allow them to freely associate and more efficiently carry out similar actions on other companies’ stocks.
Although the primary goal of BSB Coin is to foster an international community of speculators, it cannot be ruled out that the token itself will also become a speculative instrument. By burning a part of the coin every year it is supposed to have a deflationary character, which should contribute to the growth of its value. The creators assume that they will burn tokens equivalent to 10% of the profits made thanks to the actions of the community.
Currently, a presale is being conducted, in which Rafał Zaorski intends to collect 1000 ETH. At this stage, one BSB Coin is valued at USD 0.80. After the completion of the presale, however, its price is expected to rise to USD 1-2.
Importantly, the smart contract of the token is constructed in such a way that in case the assumed amount is not collected or Rafał Zaorski himself dies and work on the project is halted, all funds will be automatically returned to investors.
More details on the website: http://bigshortbets.com