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By Lucas Thomae and Owen Sizemore
On Jan. 26, Jackson Dempsey, a first-year student at UNC Wilmington, purchased $5,000 worth of Dogecoin, a relatively obscure cryptocurrency named after an online meme that was essentially worthless.
But this silly, albeit risky, investment may have paid off. At 6 a.m. on Jan. 28, Dogecoin’s value was just over one cent a piece. By 11 p.m. that night, it was skyrocketing towards eight cents. In less than 24 hours, Dogecoin’s value had jumped a whopping 600 percent. At the time of the writing of this publication, Dempsey’s Dogecoin holdings are worth around $14,000.
“I got in when it was at a cent,” Dempsey said. “It definitely exploded after that.”
The rise of Dogecoin and other unorthodox investment options, like the floundering GameStop (GME), AMC (AMC) and Nokia (NOK), were part of a massively coordinated effort by amateur stock traders across internet platforms like Reddit and Discord to undercut Wall Street.
Professional traders had made a plan to short these under-performing stocks. This strategy involves borrowing shares of stock from a broker and selling them on the market. If the prices fall, the traders could then buy the stock back at the new lower price and return it to the broker, netting themselves a profit in the process. Simply put, if the prices of GameStop and other shorted stocks fell, the professional traders would make more money.
However, retail traders in online groups like the subreddit r/WallStreetBets had a different plan. If they could mobilize a group from among their millions of community members to buy up these failing stocks and cause prices to rise, it could net them massive gains while also showing up Wall Street’s billionaires - and that’s exactly what happened.
Dempsey first caught wind of this plan in a group chat where he and his friends discussed investing.
“They were like, ‘alright, there’s going to be a run on it, we don’t know what's going to happen because big time people are shorting it, all these guys from Reddit are going to buy it’,’ he said. “So we didn’t know if there was enough volume going into GameStop and AMC to match that coming out from the shorts.”
Dempsey eventually decided not to invest in GME or AMC, opting instead to watch it unfold from the sidelines. However, other college students from around the state jumped at the opportunity.
Zach Hodges, a first-year culinary student at Guilford Technical Community College, bought a share of GameStop on Jan. 26 when its value was just over $100, selling it hours later for $380 a share. He did the same thing two days later when the stock price had dipped and then rose again.
“Riding the aftermath of the GameStop thing actually made me money,” Hodges said.
Eddy Velasquez, a first-year student at UNC Chapel Hill, took a similar approach, not just with GameStop, but other “meme” stocks like AMC and Nokia. He purchased them using money that he had received from a refunded scholarship last semester.
“I gained a little bit of money, it wasn’t much,” he said. “I only bought, like, one share each and I made about in total, probably about $50.”
To manage their investments, Hodges and Velasquez both used the Robinhood mobile app, a stock and cryptocurrency brokerage whose stated goal is to “democratize finance for all.” The app has soared in popularity among young people for its ability to quickly turn anyone into an amateur stock trader with no upfront costs.
Dempsey, the student who put $5,000 into Dogecoin, also used Robinhood to make his purchase. He had been on the platform since his junior year of high school, and said he got more involved over the pandemic.
“I tried WeBull a little bit and I almost set up a trading account with E-Trade, but Robinhood has just been the easiest,” he said.
However, the platform’s egalitarian mission was called into question when Robinhood restricted the buying of GME, AMC, Dogecoin, and dozens of other shares on Jan. 28 in response to their unprecedented growth. The company denied that it had acted in the interests of the hedge funds, but rather in response to “surging market volatility.”
Unsurprisingly, this move enraged the online community of retail investors, among them the college students that NC College Beat interviewed.
“I think that’s just very unclassy of them,” Velasquez said. “Robinhood was supposed to be a way for lower-class, middle-class, anyone to invest, right?”
Hodges didn’t buy Robinhood’s claims either, suggesting potential collusion between the platform and Wall Street.
“The whole point is that the hedge funds got mad that we did what they’ve always done to us,” he said.
Despite these students leaving the short squeeze with large gains, it was certainly a risky venture. Robinhood’s buying limits went to show that at the end of the day, the power structure of the finance world is still top-heavy.
“Now with what’s happened and what’s going on, oh yeah, definitely eat the rich now,” Velasquez said. “If you’re really so scared of losing billions of dollars, yet you have billions of dollars left, why the hell are you so worried?”
Not all college-age traders took such aggressive approaches. Kevin Aiken, a first-year Chemistry student at UNC Chapel Hill, had invested in AMC through Robinhood months before its explosion in value. He was, however, active on several online stock trading communities.
“I didn’t buy it [AMC] because of WallStreetBets necessarily, but yeah, I was part of the WallStreetBets Discord server, a few of those stock servers and I had been looking on the live feed for Wall Street Bets at the time.”
Aiken detailed that his interest in exploring the world of stock trading grew while connecting with groups at school and online.
“It was something I had just been wanting to do and I think it’s very popular among people my age...a lot of my close friends do it as well,” said Aiken.
Now that the dust has settled, Aiken is looking for more long-term options toward pursuing greater financial literacy and growth. He plans to move away from Robinhood and develop a more traditional investment portfolio.
“I don’t want to do anything risky,” he said. “I’m not trying to play the market or anything like that, but I do want to learn and I think it’s neat to poke my head in.”
With a greater motivation among young people to start investing, Aiken expressed that increasing financial literacy will be key for college students like him.
“Maybe some of these investing companies should require people to take an investment course [prior to trading]”, suggested Aiken.
Dempsey echoed this sentiment and called for schools to offer more personal finance courses.
“You know, to be more financially literate would help us right now, because there are people losing a lot of money,” he said.
Still, students like Hodges, who are riding high on their profits, are eager to take on the world of investing on their own.
“I think it’s teaching people, because I did it myself,” he said. “So if I can teach myself and I’m not a f*cking genius then anyone can. That’s just the truth to it. It's not hard, it’s not rocket science.” ●
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