By now, you have likely heard about what happened with GameStop stocks and how an active community of retail investors on Reddit, banded together to undermine the hedge funds to the tune of billions - putting some in a very awkward financial position. The response to this has been varied, but the Wall Street and official positions have been unanimous - this is not right.
But, what this has proven is how a social community can coordinate their actions and cause targeted havoc on the financial markets, with the ability to pool resources and work as one. Will the short sellers be as keen to take the risks post-Gamestop, or will they be once bitten, twice shy? And I think that this is where it is going to get interesting.
However, firstly, there are other things to contend with. For example, the trading platform Robinhood shut down trading on the affected stocks, even though what was happening was not illegal, essentially manipulating the market to favor the institutions and try to put a halt to the bull raid.
A raid is an attack, right?
And I think that this is where it is going to lead. At some point, this is going to be called "Financial Terrorism" and this kind of collusion within a community will be made illegal. As we know, once something gets labelled terrorism, it will come under various types of laws that will extend the reach of government to pry into the activities, which includes the communities themselves, to expose "threats" to the economy.
What is interesting is that the biggest threat to the economy as we know it is a change in behavior of the largest group of participants, the consumers themselves. Retail investors are part of that consumer base, even though they are generally at the higher end of the spectrum financially.
Because of supply and demand, the threat to the status quo comes when consumers change their buying habits. This isn't much of a threat previously, as what they are buying is from a narrow pool of suppliers, so the suppliers just adapt to the new trends to capture market value. The consumer class are "endusers" in the economy, not owners, meaning that whatever they buy is going to drive value to those who profit from the purchase. However, technology has changed and now consumers have alternate products to consume through a diverse range of mediums - things like Bitcoin.
Not only that, the internet itself has become a resource and the institutions have made massive gains by leveraging the capabilities, by being able to expand cheaply across the globe with low barriers to market, and lower the costs of service delivery, without having to lower their fees. The cost to transfer money for a private citizen across the globe through banks can take five days and cost 13% of the total.... on the internet. That is ludicrous, considering on that 5 day journey, not one person is involved, other than the sender who transfers and receiver who withdraws.
But, these same technologies have had their own barriers of entry lowered to the point that a community of relatively basic users, can get to the point where they can build an economy that they find valuable, tokenize it with a digital currency and transact that currency around the world among each other, even taking it out through gateways into the traditional controlled economies. This lowering of barriers creates an opportunity for not only more participants to take part, but more opportunities to behave differently.
Just like all of the post-apocalyptic stories, society is slowly getting populated by divergent behavior, but the central authority will label it, deviant behavior, as it challenges their organizational structure - their regime. At first, there will be the negative labelling of divergent players, then there will be the call for the "normals" to hunt them down for their own security, then the punishment and exile, then the return to prove that the way of the divergent is the new normal.
I skipped a few steps, but you know the plot.
I think that there are many roads leading to a point in the not too distant future, where there is a changing tide against the authorities. One example that comes to mind is the public attitude toward whistleblowers and those who release data dumps of classified material. While they are criminals in the eyes of the law, many people are starting to recognize that what they are being criminalized for, is bringing transparency on the wrongdoings of governments and corporations, the people who should effectively be irreproachable. Governments and publicly listed companies should have a degree of transparency and there should not be any skeletons in the closet, but the likes of Edward Snowden and Wikileaks has shown this not to be true.
Through the same channels, we also know that financial institutions have a few skeletons, again proven, if you remember the release of the Panama Papers - but are asking yourself now - "what happened with that in the end?" You have to account for every dollar you earn with full transparency, but when it gets into the millions, billions and trillions, there is little transparency needed.
Slowly, slowly... people are waking up and even though it happens like spot lightning strike events such as with GameStop, once the fire is alight, it begins to spread and the heat will shift behavior, to spread the flames further afield and into new locations. This time it was GameStop, but what will it be next, which market? Once the retail raiders get into the groove, what will be the defense against multiple groups spread globally?
Legislation? Punishment for participants? Will it be social profiling and algorithms to identify and strip the assets away from those who were involved in the forums? What will the response of the people be, considering that those involved aren't the downtrodden poor, they are the middleclass and up, movers and shakers?
This puts the authorities in a precarious position, because this is the group of people they have been milking for years, driving their wealth up the pyramid at an increasing rate, into the hands of fewer people at the insanely high point. But, the more this happens, the more power the group claws back and in time, the momentum of the pendulum will stop and start to swing back in the other direction.
Essentially, what is happening now is no only do we have the skills and technology to organize and gather, we also are able to participate in the creation of new financial vehicles and practices that were previously only created by centralized authority and institution. This means that for the first time in globalized history, we have the ability to empower ourselves and our own communities, creating products and services to generate and transfer our wealth that we own, outside of the control of the traditional authorities.
This is a major threat to their existence, which will likely be met with resistance, not compromise. Rather than seeing this as an evolution of economic practice and a changing of standards to be more robust and inclusive, they will attempt to hold onto their power through the tools at their disposal. The tools that can drive their subjects to support them into going to war or, allowing them to bail out their banker friends once again. In the past, there was little other choice but to let them rule, but the past is rapidly becoming a future where there are alternatives.
Many of those alternatives are going to be built on blockchain and crypto, leveraging to power of decentralization for security and distribution, as well as the place where innovation can be born and communities can form.
The fires are growing.
[ Gen1: Hive ]
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