Trying to understand the gamestop situation is making my head spin.
I need a better understanding of finance.
This page is a permanent link to the reply below and its nested replies. See all post replies »
contrails · 56-60, M
The price of things is set by how much people are willing to pay for them. If people get together and decide pay a lot of money for them, others will think "Gee, this thing is getting more valuable by the minute, I better buy some too!!". So the more people buy it, the more "in demand" the stock is, and the higher the price gets... Because the price gets higher and higher, more and more people talk about it and then it becomes more fascinating, so it becomes MORE in demand, and then the price rises even HIGHER!
Note that it's a purely psychological thing: people pay for what they THINK the stock is worth.
It's also called a bubble... The price goes up and up until some people start realizing there is nothing that merits the stock to be THAT highly priced... Then people start selling... The demand lessen and thus the price falls... Before you know no one wants to get near the stock, and because the stock is now less and less in demand, then it's value plummets...
There is something economists called "the fundamentals" of a stock: whether a company stock has potential as a money-making business. Economist agree that gamestop fundamentals are dire... But some people in reddit decided to buy the stock, encouraging others to buy, just to prove the financial establishment wrong.
Yet, the fundamentals remain unchanged. The stock price will come back crashing down to reality and a LOT of people who cheerfully played this game will lose a lot of their money...
See also "Tulip Mania": https://en.wikipedia.org/wiki/Tulip_mania
Note that it's a purely psychological thing: people pay for what they THINK the stock is worth.
It's also called a bubble... The price goes up and up until some people start realizing there is nothing that merits the stock to be THAT highly priced... Then people start selling... The demand lessen and thus the price falls... Before you know no one wants to get near the stock, and because the stock is now less and less in demand, then it's value plummets...
There is something economists called "the fundamentals" of a stock: whether a company stock has potential as a money-making business. Economist agree that gamestop fundamentals are dire... But some people in reddit decided to buy the stock, encouraging others to buy, just to prove the financial establishment wrong.
Yet, the fundamentals remain unchanged. The stock price will come back crashing down to reality and a LOT of people who cheerfully played this game will lose a lot of their money...
See also "Tulip Mania": https://en.wikipedia.org/wiki/Tulip_mania