Was January 2020 a defining moment?

January 2020 is shaping up to be a defining moment in Financial Markets that will be with us for years to come. I am not talking about misallocation of capital into various asset classes, due corrections in certain sectors or disappointing Macro data points.

I am referring to the revolution and reaction that the GameStop saga started.

The internet is powerful and arguably the most important force in shaping the world during these past few decades. Information travels at the speed of light, movements are organized online and each year that goes by is more difficult to hide the truth. The Web is a huge democratic machine.

The coordinated intervention by various operators like Robinhood and other trading firms to limit buying on selected securities and only allowing selling, had the veiled intention to protect large funds that were effectively running into trouble because of their short positions.

In a nutshell, intervention was necessary to save the rich. The excuse to do so was that retail investors didn't know what they were doing therefore needed to be "protected" from harming themselves. In reality, retail investors were winning against professionals at the game the latter created, therefore the rules of the game had to be changed. Regular people cannot be allowed to win at the casino, only losing is acceptable.

Yes, many long GME retail traders will lose lots of money when inevitably the value of its stock comes down to earth were it belongs. Not for one minute I believe these people won't lose money. They will, however my point is that it's their choice to make. Just like it's legal for them to enter into almost certain money losing option trades, then they can decide to go long a stock. It should not be forbidden selectively. Market makers sell OOM options (out of the money) knowing that the almost totality of those will expire worthless. The retail trader, in the desire to get rich quickly, enters these trades and loses all the time. If you really want to protect the retail investor, then forbid statistically "almost impossible" trade outcomes and leverage.

If you ask me, and it's probably evident from my commentary, what happened it's despicable. However we knew all along that the game is rigged. Now it has been made widely known in the open. The Internet is making sure everybody knows what happened. I myself am contributing to spread knowledge on this subject.

The outcry is everywhere and I invite you to read more opinions on this topic on the web to make up your own mind.

It is not a fair game. Professional investors have access to better investments, better trading opportunities and are generally much better equipped to be successful at this activity.

Retail traders do not play on the same level however what I am not understanding is why when they are actually "beating" professionals at their game then the activity needs to be stopped.

It's a double standard

The retail traders had been cheated on by their brokerage firms. They are not allowed to risk their money like the professionals in order to try to become wealthier. This game it's not for them. They can only participate into a passive index fund with management fees and simpler buy and hold strategies, they need to be protected not from the professionals but from themselves. In reality the story is they cannot sit at the adults table.

The talks of decentralization started. And at some point this happened:

With Elon Musk and several others following suit, a new trend starts on Twitter:

And we finally get to the point of this post: what happened was an additional validation for Bitcoin and DeFi. I consider this a defining moment of modern financial investment theory.

A large part of the investing population is inevitably evolving in the way it thinks and is now considering adopting Bitcoin and other DeFi protocols. I believe this is only the beginning.