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After the Dogecoin crisis, DeFi will take over to build a new financial ecology?

Last week, U.S. stocks staged an absurd and passionate “Wall Street fierce battle.”

On one side are Wall Street giants and on the other, there are tens of thousands of retail investors. In such a battle between elephants and ants—Wall Street was overthrown, Robinhood became an accomplice, populism flooded into the financial market, retail investors were destroyed, and the entire Nasdaq The chaos became a pot of porridge.

Wall Street giants set up the stage of “market freedom”, and then took it down by themselves-many brokerages restricted trading, raised margins, and US retail investors who could not open stock positions took a break and moved to the currency circle. They have new Target-Dogecoin. So on January 29, there was no wicked dog hook, which soared by 1200% in two days.

The contradiction between retail investors and institutions in the US financial market is becoming fierce. When the mask of “market freedom” of Nasdaq was removed, the credibility of traditional financial institutions fell, populism flooded into the financial market, and the general investors’ financial awareness became awakened. Will DeFi, which will become popular in the second half of 2020, become the key to breaking the game?

Wall Street fierce battle, small retail investors regain the right to speak and be cut off?

Who should dominate the voice of the financial market, is it an elite organization holding a bunch of statements, or a small retail investor who is crazy in the community? You may find this question funny, but a “Wall Street fierce battle” changed the world’s view of retail investors.

The story starts with a forum called WallStreetBets (WSB, Wall Street Gambling).

WSB is a sub-section of “American version of Tiger Fighting” Reddit, which gathers a group of American “small and medium retail investors” with entertaining spirit. Although it is a stock discussion forum, the friends in WSB like to post some sand sculptures, calling everyone to stud together, sharing their own investment income or losses, claiming to be autist (autistic patients) and retards (mentally handicapped), expressing those ” The operation of “beep the dog” is also done by his own weak intelligence.

Many small retail investors who gather sand sculptures, entertaining spirits, secondary two, and desire for wealth have a common belief: call options are the unbreakable truth of getting rich. So they bought up the shares of Gamestop (game station) frantically and cut a handful of institutional leeks.

Gamestop (GME Game Station) is a game retail company founded in June 2000. Many otakus on the WSB forum are fans of the company. In the past five years, the company’s physical stores have been operating poorly, net income has also become negative since the fiscal year 2019, and stock prices have also fallen. At the end of January 2019, GME’s stock price was still around US$15, and then it fell all the way, staying below US$5 for a long time. However, since August last year, with the support of a group of diehard retail investors, the company’s stock price began to rise strangely. On January 21, the closing price was $43.03.

In the face of GME’s bizarre rise in stock prices, many institutions have issued question marks. From the financial report, GME’s rise is unreasonable: “From Q1 to Q3 in 2020, GameStop will lose money for three consecutive quarters: Q1 has a net loss of approximately US$166 million, Q2 has a net loss of approximately 111 million, and Q3 has a net loss of US$18.8 million.”.

Based on the analysis of the financial report, in 2020, a large number of institutions will short-sell (short futures) GME stocks, and the short-selling ratio even reached an incredible 140% at one time, resulting in repeated failures to borrow stocks on the market.

Despite the poor fundamentals, GME’s stock price rose unreasonably, and finally, those short-selling institutions could not sit still. On January 21, GME’s main short-selling force, Left, the founder of Citron Research, announced on the 21st that “GameStop’s valuation is already too high and the stock price is expected to fall back to $20”.

This move aroused strong dissatisfaction among WSB retail investors-“Why can the organization bring the rhythm?” To swear sovereignty, the small fans shouted in the WSB community wildly, calling on everyone to buy GME stocks to fight against the Air Force.

At first, some retail investors bought up with an entertainment mentality but inspired by the money-making effect, it quickly escalated into a “strangulation” of short-selling institutions. As the small fans entered the market one after another, GME’s stock price began to rise wildly from 43.04 US dollars, and the highest rose to 347.51 US dollars, which was an 8-fold increase. In addition to GME, AMC Entertainment, Blackberry, American Airlines and other stocks have also become a battlefield for retail investors.

The mentality of the institution and the wallet have exploded. Based on experience, as long as Citron releases a short-sale report, the relevant company’s stock price will fall sharply, but this time they planted.

Andrew Left, the founder of Citron Research, directly persevered and announced that Citron Research is no longer short selling, but this is because he and his family have been attacked and threatened by GME stockholders, rather than distrusting his own judgment, populism Spreading in the financial markets is the sadness of Citron.

In addition to the Citron research, the hedge fund Melvin had to seek emergency funding assistance of US$2.75 billion from hedge funds such as Castle Investments and piont72 because of serious losses in short-selling GME. However, on January 25, retail purchases were overwhelming. The stock prices of GME and AMC soared by more than 140%, and the rescue money was completely lost.

In this “air-squeeze war”, retail investors were also destroyed. At the close of trading on February 2 (Tuesday) local time, GameStop (GME) plunged nearly 60% to $90.33, other retail stocks AMC Cinemas fell 41%, and Goss Electronics fell 42.86%.

The speculative craze has subsided, and WSB’s casuals pay with tears.

Dogecoin skyrocketed by 1200%, DeFi or will build a new financial ecology?

Although the GME incident is drawing to a close, the retail investors of WSB have not gone away. If it is GME that is their struggle with the organization, the next play is a perfect show of the entertainment and anti-establishment spirit of this group of retail investors-Dogecoin.

Dogecoin is an “elderly player” in the crypto-asset industry. It is known for its “dog head logo”. It was born on December 8, 2013. It was based on some “spoof spirit” by Australian Jackson Palmer. , It took more than 3 hours to copy and fine-tune from the Bitcoin code, mainly as a system tip on Reddit and Twitter to reward users who create or share high-quality content.

With the spread of the GME war, the retail legion rushed to the digital asset market and chose the “Dogecoin” that best fits their spiritual core.

On January 27, the closing price of Dogecoin was still at $0.0076. On January 28, Dogecoin had quadrupled, reaching a maximum of $0.0278. Many people thought this was the end and cashed out, but they did not expect it to The retail army is just beginning.

“Famous shouting single”, Dogecoin CEO Musk also started to stand for Dogecoin on April Fools’ Day in 2019. Last Thursday he posted an artistic photo of Doge on Twitter to express his support for Dogecoin.

On January 29, Dogecoin reached the peak of the dog’s life. It rose from the ground and skyrocketed to 0.085 US dollars. It soared 12 times in two days. It went out of the circle and was ranked fourth in the hot search on Weibo.

The surge of Dogecoin has brought excitement to the crypto asset industry, but there is obviously a lack of value support behind the huge increase. With the harvest of speculators and the exit of retail investors, the price of Dogecoin has dropped rapidly and has fallen to $0.03 as of press time.

Game post and Dogecoin’s skyrocketing rise and fall, the behaviour surface is the confrontation between retail investors and institutions, but at the bottom of the logic of this “air-squeeze war”, it is retail investors’ dissatisfaction with institutions’ control of the financial market.

Retail investors began to understand the operating mechanism of the financial market, began to reconsider their reasonable position in the market, and eager for a fair dialogue with institutions. This demand extends to the blockchain industry, which is the crazy growth of DeFi (decentralized finance).

From the second half of 2020, “liquid mining” has ignited the DeFi boom, and high-quality projects such as Uniswap and Compound have burst out in succession.

DEX (decentralized exchange) represented by Uniswap and Sushiswap, both on-chain data and currency prices are exciting recently. According to the data on the OKLink chain, as of the press date, the total lock-up volume of Uniswap V2 is still growing at a high speed, and today hit a record high of 3.77 billion US dollars; in terms of currency prices, the token UNI also reached a record high of 19.473 US dollars at the time of publication. It is about 5 times that at the end of last year. Sushiswap, which sits in the second place in the DEX, has also risen from 2.5 US dollars at the end of last year, and today hit a new high of 13.694 US dollars.

At the same time, the world’s largest derivatives exchange-Chicago Mercantile Exchange (CME)-will launch Ethereum futures on February 8. It is currently awaiting regulatory review and approval by the US Commodity Futures Trading Commission (CFTC). Ethereum and the entire digital asset industry have brought significant benefits.

Under the optimism of the industry, the ETH price hit a record high of 1,570.94 USD today. As of 14:00, the Ethereum 2.0 mortgage contract has also received more than 2.92 million ETH, worth approximately US$4.5 billion, making this contract address already the second-largest holding address on Ethereum.

ETH is the main soil for DeFi projects in the digital asset industry. The increase in its current price is not only the result and embodiment of DeFi’s prosperity but also will feedback the further growth of DeFi.

With the rapid expansion of Uniswap and other projects and the smooth progress of ETH2.0 pledge, the total lock-up of DeFi has achieved a leap, from 1.17 billion US dollars in June last year to 41.25 billion US dollars, an increase of more than 40 times.

DeFi provides a set of open, transparent, and equal financial infrastructure. The prosperity of DEX, decentralized lending, asset agreements, etc. is not only the result of the current round of digital asset industry market conditions but also reflects the general investment in the current financial market The demands of the author.

With the advancement of blockchain technology and underlying design, favourable market conditions in the digital asset industry, and general investors’ pursuit of a fair financial market, the ecological construction of DeFi has gained unprecedented momentum. With continuous iteration and improvement, it will become the future financial market The important infrastructure of China will help build a new financial ecosystem.

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