GameStop: How WallStreetBets Beat Wall Street's Game
By Swapnil Kabir
April 2025
In January 2021, a few hundred thousand Reddit users with smartphones and stimulus checks did what countless hedge funds and finance PhDs thought impossible: they broke Wall Street’s algorithm. The GameStop short squeeze was no normal case of market volatility. It was financial chaos theory wrapped in a deep-fried batter of shitposting, and it left billionaires reaching for the antacids.
For those unfamiliar with the company at the center of this saga, GameStop (ticker: GME) was once the undisputed king of video game retail. Founded in 1984, the company quickly morphed into a mall staple. Their business model—selling physical games and consoles, and collecting trade-ins—had thrived for decades. Their store count peaked at 6,600 locations in the mid-2010s. Then it crashed harder than a BSOD midway through Cyberpunk, as digital downloads replaced physical games and online retailers ate into their market share. By 2020, the company was closing hundreds of stores annually, with a model that analysts considered outdated as a cartridge blow.
Hedge funds, like Melvin Capital, were so confident in GameStop’s demise that they shorted the stock to oblivion—borrowing and selling shares they didn’t own, betting the stock’s price would crater so they could buy them back for cheaper later. Classic Wall Street opportunism.
Enter r/WallStreetBets, a subreddit where financial thrill-seekers plot absolute market mayhem. Led by "Roaring Kitty" (a.k.a. DeepF***ingValue, a.k.a Keith Gill)—a regular guy with a headband who hyped GameStop before hyping GameStop was cool—these retail investors spotted something the suits missed. If enough people bought GME, those short-selling funds would be forced to buy back shares at any cost to cover their positions, creating an upward price spiral known as a "short squeeze."
What happened next wasn’t just a market event; it was financial poetry:
GameStop shares skyrocketed from $17 to nearly $500 in just a month
Wall Street veterans lost their minds on live TV
Melvin Capital hemorrhaged billions and needed a $2.75 billion bailout
Robinhood, the trading app that promised to “democratize finance”, ironically restricted trading on GME when average folks started winning
Perhaps most beautifully ironic was watching hedge fund billionaires—the same people who lecture about “free markets” and “financial prudence” crying foul when the game they rigged got unrigged against them. Suddenly, when regular people used the same tactics Wall Street had employed for decades, it was “dangerous market manipulation.”
The congressional hearings that followed were pure theatre. Watching Robinhood CEO Vlad Tenev squirm in his seat while explaining why his platform restricted trading was almost as entertaining as Roaring Kitty’s “I am not a cat” testimony, where Gill maintained that he simply believed in GameStop’s potential while the establishment painted him as some kind of financial troublemaker.
With GME being as heavily short-sold as it was, the world’s hedge funds were rattled by some pretty severe market tremors. Melvin Capital lost close to $7 billion on their bets, a Dark Souls-level death penalty. They eventually shut down in mid-2022. Other firms lost loads, even without going out of business. Trading platforms added new safeguards (read: ways to protect the wealthy). And a generation of investors learned that the stock market isn’t so much a reflection of economic reality as it is a psychological battleground where narratives sometimes trump fundamentals.
While some Redditors got rich and others lost their shirts, the GameStop saga was never really about the few billion dollars tied up in GME. It was about exposing the hypocrisy of a system that preaches capitalism for the masses but socialism for the losses of the privileged. For one brief, beautiful moment, a bunch of self-proclaimed “diamond-handed” retail investors armed with stimulus checks and rocket emojis took over the market and proved they didn’t need to play Wall Street’s game. They could rewrite the rulebook.
Works Cited
Goldstein, M., & Kelly, K. (2022, May 18). Melvin Capital, hedge fund torpedoed by the GameStop Frenzy, is shutting down. The New York Times. https://www.nytimes.com/2022/05/18/business/melvin-capital-gamestop-short.html
Guida, V. (2021, February 16). How the GameStop frenzy sabotaged a bid to ‘democratize’ finance. Politico. https://www.politico.com/news/2021/02/16/robinhood-gamestop-fintech-468971
Majocha, C. (2021, February 3). What the GameStop surge means for Wall Street. Harvard Law School. https://hls.harvard.edu/today/what-the-gamestop-surge-means-for-wall-street/
Price, M. (2024, June 7). Who is Keith Gill, the online influencer sending gamestop shares soaring again? Reuters. https://www.reuters.com/business/finance/who-is-keith-gill-online-influencer-sending-gamestop-shares-soaring-again-2024-06-07/