GameStop and Bitcoin rattle global market


The world economy has seen a fair number of rapid growths and declines, but the past month marks one of the most drastic developments in the international market in a decade. Two notable incidents have brought about this change: the GameStop stock and Bitcoin price fluctuations.


“While some may see the GameStop stock surge as a sudden happening, plenty of forewarnings were given,” Albert Hong (12), aspiring business major student, said. “The rise in GameStop stock prices reflected the underlying animosity the general public had toward hedge funds, which many believe to have caused the financial crisis of 2007–2008. This is, to a large extent, true. The global financial crisis was a result of deregulation in the financial industry, yet most of the hedge funds were able to come out of the situation unscathed, with their debts paid off by public tax revenue.”


The bailout of hedge funds during the global financial crisis prompted the Occupy Wall Street movement, a protest against these economic inequalities and the lack of responsibility placed on the hedge funds. While the movement initially brought about little political and legislative change, the recent GameStop situation is an extension of this protest against socioeconomic inequality. By uniting and buying GameStop stocks, the ‘small investors’—regular citizens who do not professionally work in the financial sector—aimed to negatively impact the economic situation of hedge funds such as Melvin Capital, who had shorted GameStop stocks for financial profit which in turn caused severe unemployment and fund shortages for the GameStop company.


“Bitcoin and the GameStop situation are related in that both of them are speculation trading, which means that investors make money off other people losing money,” Morgan Miller, AP Economics teacher, said. “Moreover, while GameStop is being portrayed as a David versus Goliath situation, I believe that the majority of the money on both sides of the conflict are from hedge funds. The massive influx of investments caused by both them and the public has essentially transformed the stable GameStop market to a Bitcoin-like one, reliant on speculation, doubt, and sell offs for generating profit. Any financial investment has winners and losers, but the problem with a speculative market is that it creates big winners and big losers. Some people are rich enough to afford to lose. On the other hand, there are people that are involved in this situation that cannot afford to lose—and will.”


Bitcoin is created through tedious computer work, requiring a large number of high performance computers. The high cost and numerous resources necessary to produce a single Bitcoin places the ability to create Bitcoin in the hands of a limited number of people. This is perhaps the greatest difference between Bitcoin and standard currency, which is created by a central bank and has its production regulated by the government. Bitcoin is unable to be used to trade for goods or pay for services; it has no intrinsic cost, but is given a value due to its scarcity and high levels of demand. That is why the Bitcoin market is so volatile—it is not governed by any previous economic understandings, but rather the whim of the people. Moreover, the recent surge in Bitcoin prices have largely been a result of blind investment by individuals after seeing the rapid price climb, rather than an informed investment by organizations.


“Apart from actively banning GameStop trading for small investors in an effort to bring down the GameStop stock prices, the US government has also made attempts to restrict Bitcoin transactions,” Evelyn Hur (12), Future Business Leaders of America club member, said. “However, an outright ban on the cryptocurrency is likely impossible, especially given the long-term reaction from the public as a result of the 2008 global financial crisis. While these two incidents happened in different corners of the stock market, I believe they both carry the message that the public can affect the American economy, and that the government should be more mindful of corporate influences on legal matters. To this end, the message of the Occupy Wall Street movement was successfully delivered.”