The markets of manipulation and their collective activism. (Part 2)

 

America is awash with US dollars, soon, with the 1.9 Trillion rescue package to be delivered from Congress to the majority of Americans at the rate of cheques to be between $600 and $1400 per person depending on the bipartisan support in congress, it will be the biggest, self funded taxpayer, bailout of taxpayers in the history of American society.   This is not package attended to reboot the American economy post-Covid 19 into a new and exciting endeavorer, but rather a money print to return to the old normal of its hyper consumption, thus, the stock market being at all time highs, while the COVID-19 death rate is still over 3000 people on a 7 day average.  This feverish speculation by not just Wall Street, has now been joined by main street, via retail trading apps such as Robinhood.   The whole concept of stimulating a fledging economy is to save jobs, but for the most part it will only ignite an already over juiced stock market with a widespread gambling mentally.  So be it, but, the ire of inflation, too much money in circulation, is all but a certainly, devoid of a Central Bank that needs to constantly keep interest rates next to 0%.  The question is valid: Why would anyone want to hold dollars in a bank account that pays nothing on interest?  When you can by a speculative stock encouraged by Tweets from the world's richest man, Elon Musk, through the so called Reddit army of retail traders with a gonzo (and greedy) crusade to short squeeze Hedge Funds. 

Yet, Musk, whose obsession and at times bizarre rants on Twitter,  which was not just from the GameStop fiasco, when he hashtagged and posted a link to a Reddit board of which galvanized the many amateur buyers to load up on options of a small unprofitable shop that sells video games.  He has over the years been reprimanded, very lightly by the Security and Exchange Committee (SEC), in lieu of his Twitter inside plays and manipulation of not just is own company Tesla, but the ongoing antagonism towards Hedge Fund managers that hold short positions (betting against the price) on his electrical car company.  These same money managers also are short speculative currencies such as Bitcoin. On January 2021, the Chicago Mercantile Exchange (CME)  released data that hedge funds have short positions on Bitcoin at 1.37 billion dollars, which is a hedged bet that Bitcoin will turn south from its over speculation.    On the 8^th February  2020, Tesla bought $1.5 billion in Bitcoin driving the price up 14% to $43,000 for a single bitcoin, the move was a 300% jump year-on-year, this move would have decimated the short positions,  hence funds would then have to join the rally buying in at the price surge of not just Bitcoin but other crypto-currencies.   Musk, who is a proponent of Bitcoin, has recently decreed, via Twitter, that is is “The Future currency of Earth”, has on many occasions offered a crusading dialogue, that has its roots in Right Wing Libertarianism philosophy, where he is against government intervention, lockdowns, regulation and rules. Which all have a tinge of conspiracy theory more than not.  That in reality neatly ties in to his dislike of fund managers who are betting against his companies and investments.     

As discussed in  GameStop fiasco: The markets of manipulation and their collective activism (part 1). There has been strange aura of wayward idealisms  being utilized throughout the echo chambers on the internet, a mix of anti-authoritarianism conspiracy theories and remnants of the alt-right fear of socialist takeovers with large dashes of right wing libertarianism all falling under a cult like banner.   The appeal of Bitcoin, as a unregulated currency, within the Alt-Right has been undeniable and has been tracked by Chainalysis insights, a blog that analyses and tracks Cryptocurrncies that have been used for nefarious activities, discovered that prior to the storming of Congress on the 6^th January 2021, a French “extremist” donated $522,000 with a portion going to a notable so called Alt-Right supporter, who attended the protests outside Congress.  However, the majority of the retail 'army' buying into shorted stocks and crypto-currencies are not being lead by extremist motivation, rather they however may actually being played by greed.   

Reuters discovered that a post appeared in Reddit on the 2^nd January  2021, claiming to be an employee at Tesla, saying that the company had bought $800 million in Bitcoin.    This is a month or so before Musk's huge $1.5 billion investment into the crypto-currency.   Post as follows:

“I am a software dev working at R&D at Tesla in California, over the past 72 hours our company bought 24701 BTC at an average price of 33142$,” a user with the handle TSLAinsider posted in the bitcoin subreddit.

“I have no idea what will happen once this reaches the newspapers but I think the price will explode even more,”

Full article:  https://www.reuters.com/article/BigStory12/idUSKBN2A920T

The post was removed by Moderators on the Tesla reddit message board of Reddit, but later appeared on the reddit Bitcoin board.  Clearly an inside trading breach, but of course difficult to pin the source  the post, but as the Reuters article goes on to explain that the SEC cannot enforce insider trading regulations on Bitcoin or other crypto-currencies due to the fact that Bitcoin is not a security.   

There is a stock market bubble and also a crypto-currency one, how far this goes until a price correction or even a crash is uncertain, but one thing to keep in mind, that any move up is to maximize later profits, a move down is to cash them in.  With the markets as overbought in their current state and everyone throwing their two cents for a play, profit taking will be swift and merciless, such is the brutal nature of investing in markets despite being funded by Central Banks.   Cash is still king and the house always wins.  Elon Musk's feigned rhetoric of a Bitcoin "Earth" may get caught up in a frenzy of profit taking.  Either that or the overheads i.e energy bills (carbon imprint) to 'mine' these coins may eat into its worth.  

Prehaps that is evident now.