Could Reddit's GameStop Run Be a Boon for Crypto?

As GameStop's stock price has continued to rise over the past week, due to users of a Reddit thread, some experts have suggested that the situation could be beneficial to cryptocurrency trading.

Over the past week, the share price of GameStop has skyrocketed to a high of $469 on Thursday, an increase of roughly 400 percent. The surge was caused by a group of Reddit users on the subreddit R/WallStreetBets, who set out to thwart hedge fund traders who bet against the company by short selling.

Several other stocks, such as AMC, BlackBerry and Nokia, have also seen a rise in price due to the Reddit users.

The surging prices of these stocks, along with social media chatter, prompted the stock trading app Robinhood to halt transactions. While the move sparked harsh criticism towards Robinhood, it also prompted questions if a similar strategy could be used in trading cryptocurrency, due to it being naturally decentralized with far less regulations than traditional stock trading.

Glen Goodman—author of The Crypto Trader and cryptocurrency contributing expert for the London School of Economics—told Newsweek that he does expect the Reddit users on r/WallStreetBets to move over to crypto trading if they continue to face restrictions like they are facing now with Robinhood.

"There are so many crypto exchanges, dozens if not hundreds. Nearly all of them are unregulated," Goodman said. "So yes, this kind of thing does go on in the crypto world. If the Robinhood traders find their hands are tied and they've got still a big appetite for ramping, pumping and dumping securities, then they would probably find the crypto world a very welcoming place for them."

The response towards Robinhood's announcement has been very critical over the platform's restrictions on certain stocks like GameStop. But according to Goodman, the same strategy could be used to increase the price of certain cryptocurrencies.

"If they all move en masse to trading crypto and start organizing what they're gonna target in the same way that they've been doing with stocks," Goodman said, "then absolutely you could see some cryptocurrencies rising by thousands of percentage points."

Andreas M. Antonopoulos, author of Mastering Bitcoin and educator on cryptocurrency, explained that the strategy used by those on R/WallStreetBets could also be used in trading cryptocurrency.

Bitcoin
A visual representation of the digital Cryptocurrency, Bitcoin on December 07, 2017 in London, England. Dan Kitwood/Getty

"Yes, this could happen. You could have a short squeeze and in fact, you could have the mother of all short squeezes in these markets because supply is constrained, because the market can't be turned off," Antonopoulos told Newsweek. "It could drive the price up even more aggressively."

"If that were to happen and then the market isn't shut down, that kind of proves why this new form of decentralized finance is fundamentally different from traditional finance," Antonopoulos added. "No one's pulling the strings here. [Cryptocurrency] is a true free and open market that operates 24/7."

While Bitcoin is the most popular cryptocurrency currently on the market, Goodman said that it may be harder for the same strategy to be used to increase its price. But he added that "it would only take a small, concerted campaign by a group of WallStreetBets people" to make the price of a much-smaller cryptocurrency "by hundreds of thousands of percentage points."

"Crypto in general has been rising pretty strongly, on and off, for about the past six months or so anyway. So it hasn't needed the WallStreetBets people to keep it going. They tend to be separate communities," Goodman told Newsweek. "But, if the WallStreetBets people start getting on board with crypto, then you can expect a lot of those prices to start going crazy."

Goodman added that he expects the users of r/WallStreetBets to migrate to crypto trading, "because they are going to face restrictions now they're in the public eye."

Antonopoulos went on to explain that the he believes the rise in GameStop's share price shows why "decentralized finance, just like decentralized money...are powerful forces because they cannot be manipulated."

"The entire space of decentralization is demonstrating its value not because of anything it's doing, but because all of the audacious abuses of power that are happening in centralized platforms," Antonopoulos said.

While crypto trading and traditional stock trading are not correlated, Antonopoulos noted that "demonstrating how rigged traditional markets are, only emphasizes the value proposition of real, open and free markets that exist in this crypto space."