Well maybe not the SAME…
Actually they’re not at all.
The short squeeze that caused GameStops price to skyrocket and what’s happening with Bitcoin are the same with a few important differences – You can not create more Bitcoin. Bitcoin has climbed since the approval of the Bitcoin Spot ETFs and it only looks like it will continue past it’s all time highs for a few reasons. Hope you have buckled in and ready for a quick economic lesson.
The GameStop Experience
The quick summary of what happened with GameStop (GME) in writing (or you can just watch the fantastically fun movie Dumb Money). GameStop stock was shorted (betting against the company) by many hedge funds who thought they were going to make easy money. Just like Blockbuster (if you’re not a 90s kid you probably don’t know what that is) on the brink of bankruptcy and a faltering company, GameStop seemed ripe for some easy billion dollar wins.
Retail investors piled into GME pushing the price higher and forcing the shorts to liquidate their position and BUY GameStop to cover their position. The price sky rocketed 11,000%. GME had one more large pump of 700% and also had over 5 million new shares issued softening the price movement 6 months after the squeeze.
So Bitcoin is going to get SQUEEZED?!
Kind of. In a way. Actually some of it has already happened. Over $89,000,000 in shorts were liquidated as the price climbed to $52,000 and ETF inflows reached $4B (that’s 9 zeroes). What’s even more exciting is that there are some big differences between GME and Bitcoin that will only provide more momentum to a short squeeze or in this case a simple supply squeeze of Bitcoin (BTC).
Here are the big differences and similarities between the two:
– GME had high short interest while BTC has short interest and majority of supply is on cold storage (illiquid).
– GME had retail investors purchase reducing supply while BTC has ETFs launch and buy BTC.
– GME can issue new shares while BTC supply is fixed at 21 million.
– GME Price Falls as shorts cover while BTC price increases after the halving.
What needs to happen to see the supply squeeze? The biggest piece is the ETF inflows need to keep up if not the BTC cycle will continue as it has. n this case a simple supply squeeze of Bitcoin (BTC). Secondly, the Bitcoin HODLrs that make up the majority of the Bitcoin off exchanges like Coinbase would need to keep it off exchanges. This reduces the amount of liquid Bitcoin available. Finally (which is going to happen barring a worldwide shutdown of the grid) the halving which is the reduction of awarded Bitcoin to miners.
While the idea of a GME type of supply squeeze could be exciting for the price of Bitcoin on top of the Bitcoin halving, it’s still an assumption. There are also a few things that need to continue to happen. So as always I’ll be watching and paying close attention to the markets.
