Recent activity in the U.S stock markets has shown the world the value of decentralized financial products–especially decentralized exchanges. What started on Reddit as an investment thesis to take advantage of stocks with large short interest to induce a short-squeeze, has turned into a battle between Wall Street and retail investors.
— Robinhood (@RobinhoodApp) January 28, 2021
Many equities brokers such as Robinhood have terminated support for many of the stocks that have been mentioned as part of the short squeeze investment thesis, such as Gamestop ($GME) and AMC Theatres ($AMC). However, many people see this termination as suppression.
When the internet began sharing their ideas and acting on the short-squeeze strategy, legacy financial institutions and banks were calling the investment strategies that derived from the internet “illegal.” However, many more people believe that the equities broker’s decision to halt or remove support for trading pairs is a much more significant restriction on freedom. After all, if someone wants to degenerate gamble on meme stocks, they should be able to degenerate gamble on meme stocks; the same way that if someone wants to enter the DeFi token casino, they should be allowed to do so at their own risk.
Decentralized financial products
Fortunately, decentralized financial products provide a solution to the problem we now know the equities brokerages have. When considering what a decentralized exchange truly looks like, Uniswap is a great example. Uniswap is a decentralized exchange and there is no central entity in the trades that take place on the platform. The users of the platform provide the liquidity as well as the digital assets that trade over the platform–it is truly a peer-to-peer marketplace. Fortunately, some digital currency service providers already offer decentralized tokenized stock trading, TDXP APP is an excellent example of this.
If there were more decentralized equity market alternatives, individuals could use them over brokers like Robinhood, and they would not run into the problems that many have run into today due to trading halts and termination.
Accelerating adoption of blockchain technologies
Similar to how coronavirus accelerated the adoption of digital payment methods, I believe that the recent events taking place in the stock market will accelerate the adoption of decentralized financial products. Many people believe that the equities brokers should not get to dictate how the people trade, no matter how risky the investments they are making are. When equities brokers decided to halt and suspend trading for certain equities, they took a significant amount of power away from investors, and even left some of them stranded in positions that had been halted.
Black swan events like the Reddit-induced short squeezes and the coronavirus force the world to adapt and change at speeds that it would not have adapted and changed at otherwise. What we are seeing unfold in the equities markets is history in the making, and strengthens the use-case for Bitcoin, a peer-to-peer electronic cash system with a public, transparent, immutable source of truth, that can not be tampered with by any third party.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.