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Recent stock market events have contributed to an increase in interest in decentralized platforms. Fall Robinhood it touched the whole cryptocurrency community, revealing the true face of the giant, which was to ensure universal access to stock trading.
Failure of Robinhood
Robinhood is a publicly traded company, around which a lot of controversy has arisen recently. The name of the platform refers to the iconic hero he took from the rich to give to the poor. Its activities, however, turned out to be not entirely consistent with this idea, and it was exposed by those it was supposed to serve - by retailers.
It turned out that the platform was managed by a hedge fund - Citadel Securities. Disappointment with Robinhood, which had high hopes, led to a shift towards decentralized financial solutions (DeFi).
Some history
In order to better understand the current situation, it is worth following the course of events from the very beginning, even briefly. In September 2019, one Reddit user identified GameStop (GME) as trade under intrinsic value, which increased its ability to obtain larger cash reserves and create a new business model.
Other users have reached similar conclusions. In December 2020, GME shares began to grow at a rapid pace to reach 2,003% in January this year.
Hedge funds such as Melvin Capital and Citron Researchby declaring their fight against GME, they suffered losses of USD 5 million. At the same time, the stock market situation was becoming more and more tense, and GameStop Revolt benefited from it, which offered the possibility of trading shares without charging a commission.
As it turned out later, the catch was that user data was sold to market giants.
What's more, Robinhood showed its second face to retailers by blocking GME's trading, and the platform's biggest customer turned out to be Citadel - owner of Melvin Capital, a hedge fund that had been selling GameStop for a while.
But that's not all, as Robinhood also automatically sold GME shares owned by users without their consent. The platform is having serious problems right now. Apart from how badly her reputation was damaged, a class action was brought against her.
DeFi as an alternative solution?
In the light of all recent events, decentralized financial systems appear to be the most sensible solution to achieve stock exchange goals. The Robinhood scandal proved that the current trading system, in practice, is far from the principles of free association and freedom of speech. Decentralized communication and financial platforms of the same nature appear tempting alternatives. The more so because the ecosystem of entities using solutions DeFi, has experienced a massive increase in market capitalization in recent months.
