The Reddit-driven trading frenzy that caused significant volatility in stock and commodity markets last week seemed to fizzle out on Tuesday. GameStop Corp shares plummeted by over 60% and silver prices also retreated. The decline in GameStop shares has resulted in significant losses for hedge funds and other investors. Short sellers experienced paper gains of $3.39 billion on Tuesday, while realized and unrealized losses for shorts this year reached $9.2 billion. The fall in silver prices may indicate the limitations of small investors’ impact on large and complex markets. Online broker Robinhood, central to the trading activity, raised trading limits for certain stocks but the market frenzy is expected to fade soon, according to analysts.
Several other “meme” stocks, including AMC Entertainment Holdings Inc, Koss Corp, Express Inc, and Naked Brand Group Ltd, also experienced significant sell-offs. The involvement of hedge funds in the GameStop saga is expected to expedite a regulatory review of non-bank firms’ growing role in the financial markets. Melvin Capital, one of the funds that bet on GameStop’s share price falling, lost 53% in January, while Point72 Asset Management lost almost 9%. Robinhood’s trading app saw the highest number of downloads last week despite concerns about transaction restrictions, and the company plans to go public later this year. Amid the market turmoil, some WallStreetBets posters remained committed to the GameStop trade, calling for unity and holding the stock. Silver prices were negatively impacted by the Chicago Mercantile Exchange’s margin hike on silver contracts.
