Almost everyone has dreamt of hitting the lottery and played the “What would you do?” game. It’s fun to imagine hitting it big, and every year millions of Americans buy lottery tickets every week, leaving their pursuit of wealth up to fate.
Some, however, take their financial futures into their own hands and scour data, press releases and every crevice of the internet for a piece of information that may lead to riches. Netflix Inc. recently released “Eat The Rich,” a documentary outlining GameStop Corp.’s meteoric rise that made (and eventually cost) some early investors millions of dollars.
Keith Gill, aka Roaring Kitty and DeepFuckingValue, is one of those that scoured every available datasheet for an investing edge. His success spawned similar stories with AMC Entertainment Holdings Inc., Dogecoin and Shiba Inu.
While meme stocks may be a trend born out of COVID-19 lockdowns, the search for hidden value is not. Recently, Atlis Motor Vehicles (NASDAQ: AMV) served as a lottery ticket for some early investors. The company raised money on StartEngine, selling shares at 29 cents per share in 2018. It started trading on the Nasdaq Stock Market on Sept. 28, 2022, and its price at close on Oct. 13, 2022, was $21.54 per share.
Those that made the minimum investment of just 700 shares for $203 in 2018 would now be up 7,327.59%. Some investors may have made out even better. Shares of Atlis Motor Vehicles hit a high of $243.99 shortly after its public listing. Any early investors that sold at the high would have realized an 8,4034.5% gain.
That type of turnaround in just four short years is astounding, to be sure, but far from an anomaly. Recent advancements in tech and social media have allowed disruptive companies to build cult followings, raise a ton of money and afford ungodly profits to those who believed in the cause. Some of the most notable venture capital (VC) bets in history include:
WhatsApp Messenger: According to CB Insights, WhatsApp has maintained its position as the best and leading VC bet of all time. In 2011, Sequoia Capital, one of the largest VC firms in the world, invested $8 million in the nascent project, valued at $80 million. One unique feature in this VC bet was that Sequoia was the only investor in both Series A and Series B financing rounds. Sequoia’s original investment grew by $2.94 billion by the time Mark Zuckerberg’s (then Facebook) Meta Platforms Inc. acquired WhatsApp.
Snap Inc. (NYSE: SNAP): In May 2012, Lightspeed Venture Partners invested $480,000 for 82 million Snap shares. Benchmark Capital Partners paid over $13 million for 120 million shares in the Series A fundraiser. Benchmark’s investment had Matt Cohler and Mitch Lasky as its leadoff partners. These initial investments skyrocketed and were worth $3.2 billion and $2 billion, respectively, in 2017.
Alibaba Group Holding Ltd. (NYSE: BABA): Japanese telecom giant Softbank Group Corp. was a key contributor to Alibaba’s success. Before the turn of the century, Softbank had already hit it big betting on the internet with Yahoo!. It bet big again with Alibaba with $20 million for 34% of the company in 2000. Softbank’s big payday would come 14 years later in 2014, when Alibaba sold $22 billion of stock, the biggest initial public offering (IPO) on record. While its IPO was initially valued over $165 billion, its public market debut saw a market cap of $231 billion for Alibaba, which put SoftBank’s value in the company at well over $60 billion.
LendingClub Corp. (NYSE: LC): From the time of Union Square Ventures’s Series D investment in 2011 to the time of LendingClub’s IPO in 2014, Lending Club scaled up its lending rate from $20 millio per month in originations to $500 million per month. In its IPO, it raised $870 million. This was a major contributing factor to the IPO jumping 56% on its first day of trading.
So, who’s next?
While it’s difficult to project, there are a couple good guesses. You could mimic billionaires Bill Gates investment firm Breakthrough Energy and invest in companies like Vantem, or you could search for companies that fit the mold of the 45 best VC bets of all time.
Candidates may arise from industries begging for disruptions. Pharmaceuticals already has billionaire Mark Cuban shaking things up with Cost Plus Drug Co., but so is TruBrain. TruBrain focuses on cognitive nutrition and has over $17 million in lifetime sales. It delivers patent-pending brain food designed by neuroscientists to enhance your memory, focus, sleep and more.
TruBrain is currently raising capital through a Regulation A offering on StartEngine with a share price of only 47 cents. Offering significant upside potential.
There is also room for even more disruption in the real estate market. Things have been shaken up by fractional investment platforms like the Jeff Bezos-backed Arrived Homes, but there may be even more untapped potential.
One way to capitalize on this may be with Rentberry. Rentberry created a platform that offers landlords and tenants a contact-free, transparent and automated means of renting properties and elps unfreeze millions of dollars tied up rental security deposits.
The company has already raised over $21 million from the top VC funds and recognized angel investors from Alphabet Inc.’s Google, McKinsey & Co., CBRE and Harvard Business School Alumni Angels. The company is almost maxed out on its current funding round on StartEngine, meaning the opportunity to buy shares at just 87 ents is coming to an end soon.
Yuri Popovich had watched his neighbours’ houses burn down to the ground in Kyiv and he needed a safe place to put his money. So he did what millions of amateur investors have done in recent years: he turned to cryptocurrency. “It was impossible and unsafe to store funds in the form of banknotes. There was a big risk of theft, we also had cases of looting. Therefore, I trusted a ‘stable and reliable’ cryptocurrency. Not for the purpose of speculating, but simply to save,” he says.
The digital asset that Popovich chose in April was terra, a “stablecoin” whose value was supposed to be pegged to the dollar. It collapsed in May, sparking a rout in the cryptocurrency market whose victims include Popovich. He lost $10,000 (£8,200). Popovich says his losses were “devastating”, although donations from sympathetic onlookers on social media have helped make up some of the shortfall. He says: “I stopped sleeping normally, lost 4kg, I often have headaches and anxiety.”
Popovich is one of many experiencing the deep chill of the current crypto winter, more than four years after the market’s cornerstone, bitcoin, marked the first digital freeze by tumbling from its then peak. It went on a long tear after that but it has come to a juddering halt, with bitcoin falling below the $20,000 mark at one point this month – far below its peak of nearly $69,000, which it hit last November.
The fall has been sharp and spectacular: an overall market that was estimated to be worth more than $3tn barely six months ago is now worth less than $1tn.
The beginnings of the latest crypto boom held all the hallmarks of being another instance of the “Robinhood economy”, named after the popular American stock trading app. Bored white collar workers, stuck at home because of pandemic lockdowns but awash with disposable income, turned to day trading as a way to pass the time. Subscribers to the r/WallStreetBets forum on the popular online discussion site Reddit doubled over the course of 2020 and then quadrupled in the first month of 2021, as a small army of retail investors flooded into assets as varied as the then bankrupt car rental company Hertz, the troubled video game retailer GameStop and the electric car manufacturer Tesla, pushing the latter from $85 at the beginning of the pandemic to a high of $1,243 towards the end of 2021.
Cryptocurrencies also benefited from the surge in day trading. Bitcoin soared from a low of $5,000 in March 2020 to more than $60,000 a year later. The currency has had that sort of precipitous increase before: in 2017, it had risen 20-fold, to its then peak of $19,000. But in the latest boom, ethereum, the number two cryptocurrency, had an even more impressive climb, from just $120 to a high of almost $5,000 in 2021.
Cryptocurrency is the name for any digital asset that works like bitcoin, the original cryptocurrency, which was invented in 2009. There is a “decentralised ledger”, which records who owns what, built into a “blockchain”, which secures the whole network by ensuring transactions are irreversible once made. In the years since then, a dizzying amount of variations have arisen, but the core – the blockchain concept – is remarkably stable, in part because of the social implications of truly decentralised networks being immune to government oversight or regulation.
Where, 10 years ago, people simply spoke of trading in bitcoin, the space has ballooned. As well as cryptocurrencies themselves, , the sector has developed in a complex ecosystem. It encompasses Web3, a broader selection of apps and services built on top of cryptocurrencies, DeFi, an attempt to bootstrap an entire financial sector out of code rather than contracts, and non-fungible tokens (NFTs), which use the same technology as cryptocurrencies to trade in objects rather than money.
The flood of money washing into the world of crypto did more than simply inflate the paper wealth of pre-existing shareholders. Instead, it led to a surge of interest in, and funding for, the vast array of projects that aimed to capitalise on the underlying technology of cryptocurrencies. For a generation of new investors, the “decentralised finance” opportunities of the sector were appealing. Built on top of the “programmable money” of the ethereum cryptocurrency, the “DeFi” [decentralised finance] sector is an attempt to expand bitcoin’s anti-establishment ethos to cover the entire economy.
Take the comparatively small sector of the crypto market known as NFTs. A product dating back to 2014, NFTs take the tech used to create cryptocurrencies, but let creators link unique assets to the blockchain, instead of money-like currencies. That means NFTs can be traded that represent works of art, virtual collectibles, or even function as tickets to events or membership of clubs. And like cryptocurrencies, they can be bought or sold in open exchanges, held pseudonymously, and packaged up or securitised in complex financial instruments.
One token, representing years of work by the digital artist Beeple, sold for $69m; another, linked to the first tweet sent by the Twitter founder Jack Dorsey, was bought for $2.9m. Individual NFTs in the Bored Ape Yacht Club collection – the most consistently desired examples of “profile pic” NFTs, designed to be used as pre-packaged online identity – regularly sold for $1m-$3m apiece. But by the beginning of 2022, the NFT bubble appeared to have already popped. “Floor” prices for large NFT collections had plummeted, and, while many large NFT acquisitions have stayed in private collection, those that have been put back on the market have fared poorly: the Dorsey tweet was withdrawn from sale after achieving a top bid of just $14,000.
And then: the crash
The crypto crisis has played out against the backdrop of wider market problems, as fears over the Ukraine conflict, rising inflation and higher borrowing costs stalk investors. Some market watchers play down the prospect of a crypto crash triggering serious problems elsewhere in the financial markets or the global economy. The total value of all cryptocurrencies is about $1tn currently (with bitcoin accounting for about 40% of the total), which compares with approximately $100tn for the world’s stock markets.
Since November the value of all cryptocurrencies has fallen from $3tn, meaning that $2tn worth of wealth has been wiped out, with no serious knock-on effects to the broader stock market – so far. Teunis Brosens, the head economist for digital finance at the Dutch bank ING, says the traditional financial system is relatively well shielded because established banks – the cornerstones of the financial world that buckled in 2008 – are not exposed to cryptocurrencies because they do not hold digital assets on their balance sheets, unlike during the financial crisis when they held toxic debt products related to the housing market.
“What has happened in the crypto market has caused great losses for some investors and it’s all very painful and not something I want to downplay,” he says. “But it would be overplaying the role that crypto currently has in the economic and financial system if you were to think there could be systemic consequences for the wider financial system or even a global recession directly caused by crypto assets.” To date, the turmoil has been limited to the crypto sector. Digital assets have been hit by some of the same economic issues that have affected the wider global economy and stock markets. Bitcoin and other cryptocurrencies have been affected by concerns over rising inflation and the ensuing increases in interest rates by central banks, which has made risky assets less attractive to investors. This meant that as stock markets declined, so too did crypto assets.
But the collapse last month of terra also hit confidence in cryptocurrencies. In June, a cryptocurrency lender, Celsius, was forced to stop customer withdrawals. And a hedge fund that made big bets on the crypto markets slid towards liquidation. Crypto investors and firms that had made bets on the crypto market using digital assets as collateral were forced into a selling spree. Kim Grauer, the head of research at the cryptocurrency data firm Chainalysis, says: “It was a combination of the stock market plus the kind of excessive reaction that is typical of crypto markets because of these cascading liquidations. In this case the key event was terra.”
She added: “Crypto is not going away. And it has experienced crashes more severe than this crash.” Regulators and various government agencies are looking closely. Harry Eddis, the global co-head of fintech at Linklaters, a London-based law firm, says recent events in the crypto asset market will strengthen regulators’ determination to rein in the industry.“nI think it will certainly stiffen the sinews of the regulators in saying that they’re more than justified in regulating the industry, because of the obvious risks with a lot of the crypto assets out there,” he says.
In the UK, the financial watchdog continues to expand safeguards on crypto products. Its latest proposals on marketing crypto products to consumers could lead to significant restrictions on crypto exchanges operating in the UK. Consumers reported 4,300 potential crypto scams to the Financial Conduct Authority’s website over a six-month period last year, far ahead of the second place category, pension transfers, which had 1,600 reports. The FCA has 50 live investigations, including criminal inquiries, into companies in the sector.
The terra collapse has also heightened regulatory concerns about stablecoins, because they are backed by traditional assets and therefore could pose a risk to the wider financial system. In the UK, the Treasury wants a regime in place for dealing with a stablecoin collapse, saying in May that a terra-like failure could endanger the “continuity of services critical to the operation of the economy and access of individuals to their funds or assets”.
“Even just the top three stablecoins hold reserves totalling $140bn in traditional assets, much of this being in commercial paper and US treasuries. A run on redemptions of the largest coin (tether) could destabilise the entire crypto asset system and spill over into other markets,” says Carol Alexander, the professor of finance at University of Sussex Business School.
Elsewhere, the EU is drawing up a regulatory framework for crypto assets with the aim of introducing it by 2024, while in the US Joe Biden has signed an executive order directing the federal government to coordinate a regulatory plan for cryptocurrencies including ensuring “sufficient oversight and safeguard against any systemic financial risks posed by digital assets”. The Federal Trade Commission, the US consumer watchdog, says 46,000 people have lost more than $1bn to crypto scams since the start of 2021.
In general, regulators have been talking tough about cryptocurrencies. The chair of the FCA has called for “strong safeguards” to be put in place for the crypto market, while the head of the US financial regulator has warned consumers about crypto products promising returns that are “too good to be true”, while Singapore has said it will be “brutal and unrelentingly hard” on misbehaviour in the crypto market.
‘I’m sure crypto will bubble again’
Where crypto goes from here is an unanswerable question. For proponents, such as Changpeng Zhao, the multibillionaire owner of the Binance cryptocurrency exchange, the sector is sure to recover – though it might take some time. “I think given this price drop … it will probably take a while to get back,” he told the Guardian last week. “It probably will take a few months or a couple of years.”
For sceptics, however, the plummet could be a lasting wound. “Bitcoin will be around for decades,” says David Gerard, author of Attack of the 50-Foot Blockchain. “All you need is the software, the blockchain and two or more enthusiasts. Unless there’s new stringent regulation, I’m sure crypto will bubble again. But if there’s a genuine consumer bubble, it may not reach the heights of this one. The 2021-22 bubble made it to the Super Bowl. As many a dotcom found out 20 years ago, there’s nowhere to go from there – you’ve reached every consumer in America.”
But one thing both sides agree on is that the dividing line between “survivable downturn” and “cryptoapocalypse” is likely to involve neither bitcoin nor ethereum, but the third biggest cryptocurrency: a stablecoin called tether. Stablecoins are a foundational part of the crypto ecosystem. Their value is fixed to that of a conventional currency, allowing users to cash out of risky positions without going through the rigamarole of a bank transfer, and enabling crypto-native banks and DeFi establishments to work without taking on a currency risk.
In essence, stablecoins function like the banks of the crypto economy, allowing people to park their money safely in the knowledge that it is not exposed to wider risk. Which means that when a stablecoin collapses, it has a very similar effect to a bank failure: money disappears across the ecosystem, liquidity dries up, and other institutions begin to fail in a domino effect. The beginning of the latest crisis in crypto was sparked by exactly that: the failure of the terra/luna stablecoin. The algorithmic checks and balances put in place to keep it stable broke – triggering a death spiral.
And so on 9 May, a stablecoin called UST “depegged”, dropping from $1 to $0.75 in a day, and then falling further, and further and further. Within four days, the luna blockchain was turned off entirely, the project declared dead. A domino effect took out other crypto establishments. Some of the “contagion” has been prevented, in part through huge loans made by Alameda Ventures, the investment arm of 30-year-old crypto billionaire Sam Bankman-Fried’s empire. Drawing comparisons to JP Morgan in the panic of 1907, “SBF” has stepped in to support the crypto bank Voyager and the embattled exchange BlockFi, and been loudly calling for support from others.
Unlike terra, tether is a “centralised” stablecoin, maintaining its value through reserves which, the company says, are always redeemable one-to-one for a tether token. The model means it cannot enter a “death spiral” like terra, but also means the stability of the token is entirely a function of how much one trusts tether to actually maintain its reserves. That trust is not a sure thing. Tether once claimed to hold all its reserves in “US dollars”, a claim that the New York attorney general’s office concluded in 2021 was “a lie”.
Tether, and Bitfinex – a bitcoin exchange that shares an executive team with, but is legally distinct from, Tether – “recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines”, Letitia James, the New York attorney general, said at the time. The two companies had transferred money back and forth to cover up insolvency, she said, and had failed to ensure tether was “fully backed at all times”, the investigation concluded.“Te ther has been the timebomb under the market since 2017,” says Gerard.
“It has reduced its market cap by 15bn USDT in the last month, and has claimed that these are redemptions, or a reduction in their holdings of ‘commercial paper’,” she says, referring to one of the key assets that Tether uses on its balance sheet: commercial paper, short-term debt issued by banks and corporations to cover immediate funding needs. Tether, for its part, remains extremely bullish – and has even suggested it may publish a formal audit of its reserves, something it said was “months away” in August 2021.
In late June, Tether announced another expansion: the introduction of the first GBP stablecoin. “We believe that the UK is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets,” says Paolo Ardoino, the chief technology officer of Tether and Bitfinex. “Tether is ready and willing to work with UK regulators to make this goal a reality.” More regulation, and further market volatility, are a given. Popovich says he is still receiving donations. “I’m extremely embarrassed. Yesterday an anonymous person sent me $50 in the form of cryptocurrency. And I’ve never borrowed anything from anyone in my life. I’m scared and restless.”
The fintech app Bumped wants stocks to be the new customer rewards programs. 2021 has been a big year for stonks. Day trading has increased dramatically throughout the pandemic as more people are at home and out of work, and the GameStop short squeeze in January briefly directed national intrigue toward the world of amateur investing, a phenomenon powered by no-fee trading apps like Robinhood.
And while some, like Robinhood CEO Vlad Tenev, believe investing to be the new American dream, a little more than half of Americans (55 percent) own some form of stock, according to a 2020 Gallup poll. Ownership was more common (62 percent) prior to the Great Recession and is still largely tied to factors like education, household income, age, and race.
Yet, stocks are more accessible than ever: Trading fees are extremely low, and employee stock ownership plans (ESOPs) are on the rise. The concept of the “ownership economy” is gaining steam, even among regular Americans who aren’t tuned into the latest tech developments, as evidenced by the NFT craze. The ownership economy’s basic premise is that equity — allowing people to have a stake in a brand, business, artist, or even influencer — generates loyalty, and establishes a relationship between the stakeholder and whatever they’ve invested in.
According to research released by the Columbia Business School in February, stock ownership drives consumer loyalty, and retail investors increase their spending at companies in which they own stock. This is, of course, good news for recognizable brands with devoted followings. The rise of conscious consumerism during the Trump presidency has moved consumers to think critically about the brands they buy from.
For better or for worse, people are demanding more from corporations and are willing to boycott or wage social media campaigns to demonstrate their discontent. On the flip side, the Columbia research shows how consumers are moved to financially support brands they have a stake in — even if it’s only a few shares.
The study, titled “Bumped: The Effects of Stock Ownership on Individual Spending,” analyzed transaction data of more than 9,000 American users from Bumped, a fintech app that opens a brokerage account for users and rewards them with stock through purchases from certain retailers. Users are able to preselect their preferred brands from 16 different groups, like travel and fashion (the study only observed the six most popular categories), and are automatically granted stock when they spend at those stores.
The researchers accessed data on users’ spending transactions before and after they opened Bumped brokerage accounts. They found that after users were granted stock from selected companies, their weekly spending increased by 30 to 40 percent (an average of $23) toward those companies, and remained around that rate for three to six months.
Loyalty, the researchers concluded, was a driving factor in maintaining a consumer’s relationship to a brand, and this incentivized relationship “closely resembles the compensation programs which address executives through stocks.” Prior research has shown that people invest in companies they care about, according to researcher and Columbia associate professor Michaela Pagel.
The study provided new evidence that “owning a stock makes people feel more loyal towards the company and in turn, they go out of their way to spend on that companies’ goods or products,” Pagel wrote to Vox via a Columbia spokesperson. “It’s a case of putting your money where your mouth is and there is a direct link between stock ownership and happiness via consumption, which hasn’t been shown before.”
Bumped CEO David Nelsen told Vox that the app allows for consumers to participate in an “entirely new reward mechanism,” similar to points or cash-back rewards. This isn’t exactly a novel idea; people naturally hold greater affinity for things they’ve invested in, but fintech developments that track and categorize credit card spending have only recently made this rewards process possible, he added.
“The concept of having millions of people investing small amounts became much more prevalent with Robinhood,” Nelsen said. “We didn’t have fractional shares when I was an investor, and it was harder to own things. Now, this technology is more widespread, and companies are building tools that break things down into smaller units to allow more people to participate.”
This idea of fractional ownership and equity is not exclusive to publicly-traded companies. Tech enthusiasts can become accredited “angel” investors for startups in need of funding, now that the Securities and Exchange Commission expanded its eligibility requirements for private investors. Similar to NFTs, fans can use bitcoin to “invest” in influencers through BitClout, a startup that claims to sell “shares” of a celebrity’s clout on the blockchain.
Most research into consumer and investor behaviors has generally categorized people as either a consumer or an investor. A 2009 study published in the Journal of Consumer Marketing was one of the first that sought to combine those two categories, although it relied on self-reported data to analyze participant motivations.
Still, it found that investors are motivated to engage in brand-supporting behaviors in addition to purchasing more from the company, such as serving as informal brand ambassadors. These behaviors solidify a longer-term commitment to a company’s success, compared to cash rewards or points that can be redeemed over a shorter period of time.
Some user testimonies Bumped shared with Vox emphasized the value of having an ownership stake, but similar to ESOPs, it’s unlikely that the fractional stocks offered will amount to a significant percentage of total company shares.
However, this could still have a greater impact on the corporate end, as Bumped looks to expand its offerings through partnerships with different companies and banks. “You’re allowing millions of people to become small shareholders,” Nelsen said. “That can be extremely impactful for any brand.”
Nasdaq Inc. said that next year it plans to begin moving its North American markets to Amazon. com Inc.’s Amazon Web Services cloud-computing platform.
The move, which will take a phased approach starting with Nasdaq MRX, a U.S. options market, involves turning over massive amounts of the exchange operator’s data to a third-party cloud service. Nasdaq didn’t disclose a timeline for moving its other markets.
Nasdaq’s ambition is to become “one hundred percent cloud-enabled,” Adena Friedman, the company’s chief executive, said in announcing the move Tuesday at an AWS industry conference in Las Vegas. “We will follow with more of our markets as we work closely with clients,” Ms. Friedman said.
Nasdaq has previously said that all of its more than 25 markets will be hosted in the cloud within the next decade.
They include six equity markets in North America, including the Nasdaq Stock Market, as well as six equity derivative markets, the Nasdaq Baltic and Nasdaq Nordic markets, and fixed-income and commodity markets.
The financial-services sector has been slower to adopt cloud computing than other industries, stemming in part from the tight regulatory oversight of banks and exchanges, as well as concerns over breaches of sensitive client data.
“To the extent that they don’t disintermediate their trading partners and investors, moving to the cloud gives exchanges greater flexibility, as well as enables more people to connect, enables people to connect easier,” said Larry Tabb, head of market-structure research at Bloomberg Intelligence.
Earlier this month, CME Group Inc. and Alphabet Inc.’s Google struck a deal to move CME’s core trading systems to the cloud.
Nasdaq already stores billions of transaction records in a data warehouse operated by AWS, including daily orders and quotes transmitted by traders. Over the years, the company has migrated a number of services to AWS, including its revenue management system for the U.S. and European markets. Its existing relationship with AWS is a big reason Nasdaq said it chose the Amazon.com unit to host its markets.
“We have had a longstanding relationship with them,” said Brad Peterson, Nasdaq’s chief technology and information officer.
Cloud systems and apps are hosted on data centers operated by third-party providers, including tech giants such as Amazon.com, Microsoft Corp. and Alphabet Inc.’s Google. The systems enable users to rapidly scale computing needs, based on demand, with far greater ease than in their own data centers.
Mr. Peterson has credited cloud systems for keeping Nasdaq from suspending trading in January, when a frenzy for shares of GameStop Corp. and a handful of other companies flooded popular online brokerages, caused a spike in market volatility and forced many operators to restrict access to trading.
He said moving markets to the cloud has the potential to provide the exchange with more security, greater reliability and better scalability, or the ability to quickly power up computing resources. Nasdaq and AWS could also create new cloud-based products and services for Nasdaq’s customers, Mr. Peterson said.
Scott Mullins, head of world-wide financial services business development at AWS, said Nasdaq’s growing use of cloud systems is driven by a need for elasticity and resilience to handle market volatility, along with hundreds of billions of trading events every day. “If you’re doing that on customized hardware, you’re going to have to guess what your capacity needs to be,” Mr. Mullins said.
The two companies have been working together to build out Nasdaq’s cloud-based capabilities since about 2012, Mr. Mullins said. “If you get a bill from Nasdaq today, it’s coming from a data lake sitting in AWS,” Mr. Mullins said.
“We’re only going to do it at a pace that works for us, AWS and our clients,” said Tal Cohen, executive vice president and head of North American markets at Nasdaq.
Ms. Friedman said the move announced Tuesday centers on the exchanges’ matching engines, systems that connect buyers and sellers and handle a vast number of price quotes and trades, many submitted by high-speed trading firms accustomed to having the exchange’s systems process orders in millionths of a second.
Mr. Peterson said that in the first phase of the move, Nasdaq’s primary data center for its U.S. equities and options markets in Carteret, N.J., will be expanded and AWS will install computing resources there. Traders will be allowed to connect their servers to AWS servers the same way they currently connect to Nasdaq’s servers, he said.
After crashing earlier this year, a slew of so-called meme stocks skyrocketed again Wednesday as individual investors remounted an effort to pump up the prices of Wall Street’s most heavily shorted companies—prompting experts to warn that the saga pinning institutional investors against Reddit traders could end badly.
Key Facts
Headlining the recent resurgence among so-called meme stocks, shares of AMC spiked more than 100% Wednesday and have surged a staggering 570% over the past month, as heightened options activity and increasing short interest in the stock help retail traders squeeze institutional investors betting on a decline out of their risky bets.
Meanwhile, struggling brick-and-mortar retailer Bed Bath & Beyond is soaring nearly 51% Wednesday as traders on Reddit’s r/WallStreetBets discussion board tout that the stock’s short interest has climbed to nearly twice the level of fellow meme-stock GameStop, which led the January rally and is up about 60% in the past month.
In similar fashion, shares of former phone-maker BlackBerry surged as much as 15% Wednesday and have skyrocketed nearly 55% in the past month as retail hype picks up now that short interest has hit a nearly four-year high.
Other resurgent meme stocks embroiled in the latest frenzy include Beyond Meat and Koss Corporation, which have soared nearly 40% apiece in recent weeks.
Crucial Quote
“Right now, the majority of Wall Street is on standby until Friday’s employment report, so meme-stock mania and cryptocurrency trading could have little resistance,” Edward Moya, a senior market analyst at Oanda, wrote in a Wednesday email, pointing to “joke” token dogecoin’s meteoric same-day rise as a sign of further unabated market mayhem. “The retail force behind this movement is still strong, so it is anyone’s guess how much larger this bubble can grow.”
Chief Critic
“Although we have seen some exiting of positions throughout the year, the majority of short sellers have been happy to sit on significant paper losses in the hope that retail investors will blink first and the losses won’t be realised,” Ortex analysts wrote in a Wednesday note. “This now looks like a flawed strategy.”
Key Background
The recent meme stock rise follows a similar surge in January, when activist investors perched on Reddit’s r/WallStreetBets board pumped struggling firms like GameStop and BlackBerry in a bid to hurt short-sellers. “There’s a certain vigilante mindset amongst those traders being drawn into this social-media frenzy to pump certain stocks,” Nigel Green, the CEO of $12 billion advisory Devere Group, said in a Friday email, adding that “extreme caution should be exercised before joining stock frenzies of such nature.” Meme stocks have been incredibly volatile this year, with most crashing in late January once institutional investors piled out of their short bets after weeks of meteoric gains. Thus far, only AMC, which has also benefitted from businesses reopening, has recouped those losses.
What To Watch For
It’s unclear how long it may be before short interest once again wanes, but some analysts have said the market could sour again once the Federal Reserve indicates it will ease up on its accommodative policy, which has effectively facilitated high asset valuations by injecting unprecedented amounts of cash into the economy. That could happen as soon as June, when Fed officials meet again to discuss policy changes.
Tangent
In another sign of frenzied investing, shares of Mudrick Capital Acquisition Corporation II plunged 15% Tuesday after a slew of Reddit traders started placing bearish short bets on the stock following a Bloomberg report its namesake sponsor cashed out of its AMC stake because shares were “overvalued.”
I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com
r/wallstreetbets, also known as WallStreetBets or WSB, is a subreddit where participants discuss stock and option trading. It has become notable for its colorful and profane jargon, aggressive trading strategies, and for playing a major role in the GameStop short squeeze that caused losses for some U.S. firms and short sellers in a few days in early 2021.
The subreddit, describing itself through the tagline “Like 4chan found a Bloomberg terminal,” is known for its aggressive trading strategies, which primarily revolve around highly speculative, leveraged options trading. Members of the subreddit are often young retail traders and investors who ignore fundamental investment practices and risk management techniques.
The growing popularity of no-commission brokers and mobile online trading has potentially contributed to the growth of such trading trends. Members of the communities often see high-risk day trading as an opportunity to quickly improve their financial conditions and obtain additional income. Some of the members tend to use borrowed capital, like student loans, to bet on certain “meme stocks” that show popularity within the community.
