Robinhood and GameStop proved we need a new financial system


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King Midas is most famously remembered by way of the fable we inform our youngsters that the king may flip all the pieces he touched into gold. At first, it was a fantastic concept that his greed turned even meals into gold, leaving him rich however unable to dwell. 

Robinhood’s CEO and its board had the unattainable King Midas dilemma this week: deciding whether or not to aspect with their prospects and allow them to make over $15 billion in earnings or halting buying and selling and permit solely the sale of GameStop (GME) to allow the money-hungry shorts to cowl their place at decrease costs and keep away from large losses. Robinhood showed everyone that its favorite color is money, and its associates are the identical individuals who ensure you nearly by no means win buying and selling on Wall Avenue.

Associated: GameStop saga reveals legacy finance is rigged, and DeFi is the answer

Greed will win repeatedly

Because it normally does on Wall Avenue, greed triumphed. It was not solely Robinhood, Interactive Brokers, Ameritrade, Charles Schwab, and Citadel and Level 72 however all centralized funds sided with the shorts.

Robinhood launched a platform and an app that represented the individuals and that was at all times going to behave within the customers’ greatest pursuits. Nonetheless, the golden rule of startups applies: Should you don’t pay for the product, you’re the product. The corporate’s actual plan was to collect sufficient order movement and property to cost massive market makers lots of of thousands and thousands of {dollars} in charges associated to securities lending and order movement. The professionals on Wall Avenue name retail buyers “plankton,” as it’s what hedge funds and establishments feed upon to ship obscene earnings and bonuses to their staff and shareholders.

How is it doable in 2021 to have 136% of inventory promote brief? Who permits such issues to exist and why isn’t anybody being held accountable? Whereas everybody is targeted on enabling the Reddit mob to purchase GME, nobody is wanting into the foundation reason behind the GME drawback: the collusion of brokers and hedge funds to make use of bare shorting to destroy firms for pure revenue.

When the GameStop short squeeze occurred, we discovered who Robinhood’s largest buyer actually was: Citadel & Point72 (two of probably the most storied hedge fund managers on Wall Avenue), which pays Robinhood over $300 million in charges yearly for the order movement and securities lending. It’s laborious to consider Robinhood has its group’s again when it’s at all times wanting over its personal shoulder.

Associated: r/Wallstreetbets vs. Wall Street: A prelude to DeFi bursting onto the scene?

Crypto is the shining metropolis over the hedge

Creating unobstructed entry to fundamental monetary companies has the potential to unleash the genius and sleeping expertise in our society. IQ is distributed equally throughout the planet, however entry and alternative will not be. Typically, entry is dependent upon standing and wealth, which suggests beating the system is unattainable. What is feasible? We have to reap the benefits of this second, when the normal monetary establishments are uncovered, to introduce the waves of innovation which were occurring on blockchain applied sciences.

From bare brief positions to mendacity about how a lot annual share yield you actually must be making from holding your property with these establishments, it’s time to introduce actual, impactful monetary freedom by way of monetary instruments and strategies that act in one of the best curiosity of the customers and never the abusers on the very prime.

There’s a motive why among the most clever, progressive and community-focused leaders are including Bitcoin (BTC) and Ether (ETH) to their wallets and including them to their Twitter profiles at the moment. In protest of what we’ve got witnessed this week — as a result of irrespective of how laborious they fight — hedge funds, fats cats and tech bros can’t flip Bitcoin into {dollars} reserved just for their very own pockets as a result of the decentralized group is greater than they’re.

This text doesn’t comprise funding recommendation or suggestions. Each funding and buying and selling transfer entails danger, and readers ought to conduct their very own analysis when making a choice.

The views, ideas and opinions expressed listed below are the creator’s alone and don’t essentially mirror or symbolize the views and opinions of Cointelegraph.

Alex Mashinsky is without doubt one of the inventors of Voice Over Web Protocol with a foundational patent courting again to 1994 and is now engaged on Cash Over Web Protocol know-how. Over 35 patents have been issued to Alex referring to exchanges, VOIP protocols, messaging and communication. As a serial entrepreneur and founding father of seven New York Metropolis-based startups, Alex has raised greater than $1 billion and exited over $3 billion. Alex is the CEO and founding father of The Celsius Community, a crypto lending platform based in 2017 that gives members with curated companies unavailable by way of conventional establishments.