| Author | Source |
|---|---|
| u/forzan |
Disclaimer:
I am not a financial advisor and this is not financial advice. I barely understand how the stock market works. Professionally I’m a network security researcher – my job is to find and explain vulnerabilities in other complicated systems that my smooth brain barely understands.
Guess what you fucking idiot – you aren’t allowed to collapse the entire financial market in less than a week using a phone app. It takes more time.
There are likely several million new synthetic longs of $GME, diluting the market, that were created on 01/28/21.
They were created by a market maker (or possibly several market makers) to stop the beginning of a short squeeze that would have bankrupted hedge funds if a margin call hit them, which ultimately could have financially impacted those market makers once liability for the shares was transferred. These shares weren’t borrowed from anyone. They’re imaginary. Pure fiction. A promise only a handful of entities can make.
The reason they did this was to buy time to save their own asses. The reason they were allowed to do this is because regulations let them.
The creators of those shares have 21 days to deliver. Until then, they aren’t paying interest. There isn’t a public record of their creation – the closest insight we have to the number of synthetic longs in existence for $GME are the failure-to-deliver numbers, and $GME is a major outlier in that field. A fucking terrifying outlier.
We aren’t bleeding out a hedge fund by holding. Melvin very likely is out of their position after losing half of their fund. There aren’t ‘new shorts replacing the old’. Instead, a buffer of imaginary stock was created by a market maker to ‘flatten the curve’ when a massive number of shorts had to cover once retail buyers started rushing in.
That’s why you aren’t seeing short interest increase even though there aren’t any short shares left to borrow.
These assholes are praying that in the next month, retail buyers get scared, bored, or distracted. They’re spreading FUD, attacking with short ladders, hoping you watch the short interest drop and think it’s over. They’re counting on you to sell your $GME at a bargain rate so you can pay rent, because they think you’re just fucking retail scum betting on a shit company, and they’ve been playing this game longer than you’ve been alive.
They’re also counting on you to obsess over things you can measure that they can hide. They want you to set rules and limits on when you’re going to run away.
Simultaneous to the creation of these synthetic longs, DTCC increased collateral requirements on 01/28/21 to purchase $GME to 100%.
This led smaller brokers like Robinhood to restrict trading, depressing the price, conveniently making it less expensive for market makers to recover their synthetic longs.
The people that pushed this collateral increase knew exactly what would happen, because it’s their job to know what the impact will be when they make changes like this.
DTCC openly stated they increased collateral requirements for $GME to reduce risk to their organization. DTCC recognized financial liability in this squeeze could eventually reach clearinghouses if the market makers went bankrupt. They know exactly what the failure-to-deliver numbers mean for this security.
It’s possible that DTCC created new collateral requirements in coordination with the flood of synthetic longs explicitly to make it easier to recover those shares. It is also possible these actions were taken without any coordination with market makers, because DTCC knows it could have dampened and stretched out a squeeze through this act alone.
Their strategy is to stretch out a short squeeze into a ‘long high’ they can recover from if retail shares are sold over time, since retail can’t buy them back.
And the people working at DTCC likely rationalized this was ‘the right thing to do’ – to prevent a systemic failure that could have impacted the entire stock market – because preventing systemic failures is the only reason organizations like DTCC exist.
Meanwhile, Robinhood – the smallest player in the game – honestly DTCC’s buttboy in this scheme – is going to be grilled by Congress over this shit.
Did you think we were the only ones that saw a black swan event coming when we bought shares?
The root problem is there are several players in the market capable of creating new shares without paying interest, capable of restricting trading – and they all face severe financial liabilities if a squeeze happens. They want to turn the squeeze into a slow burn so the damage doesn’t hit them.
If we continue to hold, a squeeze could happen sometime around or after Feb 18th, or another market maker could create even more synthetic longs to dilute the market, passing the hot potato. This could make their problem even worse once those shares are bought and held.
This could continue for an extremely long period of time until a financial regulator steps in and forces them to buy the shares they’ve sold.
TL;DR:
WSB is being made into a fall guy for the collapse of the market due to the creation of a massive number of preexisting synthetic longs that were bought and held. To fix it, market makers decided to make more, but their cure is also a poison they can’t stop taking.
Strategy:
Hold your positions, buy at any price you can afford to hold forever, and hope that retail owns more shares than the total number that exist for $GME. Contact the SEC and ask them to investigate and to halt trading of $GME – time is on your side if the clock ticks down the deadlines for market makers, while the stock cannot be sold by paper hands.
Postitions:
100 $GME 💎🙌 – but only holding for $10,000/share – I’m not so greedy that I want the entire market to collapse.