If you’re like me and you’ve been hearing all about GameStop recently, you’re probably wondering what is happening, and understandably so. This whole thing deals with the stock market, subreddits, and hedge funds, which are already confusing enough, but don’t worry! I’ll explain what’s going on and how the entire situation is going to change the way that Wall Street views recreational traders.

     First, an explanation of the factors in the situation. We have Wall Street hedge fund managers, which make money by trading stocks. One way they can make money is by short-selling stocks, or “shorting.” When an investor shorts, they first find a stock that they expect to fall in price, so they borrow shares of that stock through a broker and then proceed to immediately sell it. Then, when the price of the stock drops, they buy back shares of the stock and return it to the broker. Since they bought it back for less than they sold it, they have made a profit out of the entire exchange. Shorting is done en masse, so incredible amounts of money are made by successfully shorting a stock. 

     Then, we have Reddit. Reddit is a popular social networking site, which consists of millions of different communities called subreddits, each dedicated to their own topics or subjects. In the case of the GameStop Incident, one particular subreddit named r/WallStreetBets is the reason this entire thing is happening. When a few users got wind that some large Wall Street hedge funds were planning on shorting a few companies’ stocks, namely Gamestop, AMC, and Nokia, they told the entire subreddit – comprised of about 2 million users – to buy as much stock in these companies as they could. 

     This is where things get interesting.

     After much of r/WallStreetBets agreed to buy stocks (mainly GameStop’s), they went ahead and did just that. Collectively, the subreddit bought so much stock that Gamestop’s stock price went from $20 to almost $350 in just under two weeks. Now, that’s great for all of them, but the reason they did this was essentially to mess with Wall Street. The rising price of the stock goes directly against what the hedge fund shorters were hoping would happen, which means that instead of them making money, they started losing money on an enormous scale, last estimated to be around 13 billion dollars total. It’s not hard to see that just the efforts of one group of people on a social media app were able to cause an unbelievable amount of damage to Wall Street investors in such a short amount of time. 

     However, despite the damage that r/WallStreetBets has caused to some major hedge funds, the money is still going to Wall Street in the end. It is a wake-up call for those traders not expecting a horde of tiny traders coming to mess with their money, but more people trading will always mean more money for Wall Street. This is evident now, as GameStop’s stock crashed from its high of $350 to just under $50 only three weeks later. 

    With inexperienced traders comes an unstable market, as we’ve seen in the last month. Although the whole situation has quieted down substantially, it’s unlikely that we’ll see a similar occurrence on the same scale in the future. This is simply just because of the difficulty of getting so many people together to make such a risky decision, and they’ve already seen how poorly it can go if people don’t follow through.