Robinhood Killed the GameStop Short Squeeze
The GameStop short squeeze may be over – and retail traders have Robinhood to blame.
As soon as Robinhood put restrictions on GameStop shares, volume and price action completely died. Robinhood only allowed traders to purchase one share of GameStop on Friday afternoon before upping the restriction to two shares per user.
These restrictions completely killed the GameStop rally. Volume fell by two-thirds between Tuesday and Friday, partially due to Robinhood and other brokerages limiting how many shares traders could buy.
There are definitely other factors why GameStop’s rally slowed down. One major reason is that many people took profits. But the squeeze could have likely continued for several more days if traders could have continued to buy GameStop.
On a Sunday evening Clubhouse chat with Elon Musk, Robinhood CEO Vlad Tenev said he didn’t want to restrict users, but had to because of demands from their clearinghouse.
Could the GameStop short squeeze have continued?
Most likely yes. Short interest was still over 100% as of Friday, meaning an uptick in the price would have caused even more buying from shorts looking to cover.
For now, it looks like the GameStop rally might be over. GME was down 31% today, and is down another 17% after hours.
But many will wonder if it was a fair fight.
Here is an interesting thread on the situation from Christina Qi: