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The GameStop saga is by far the biggest finance story of 2021. This raised many questions about the reliability of large companies and exchanges, after which more and more people began to argue that the future lies with decentralization.
In a nutshell, the GameStop saga goes thus- GameStop, the video game retailer, was short over 140% of the stock’s float by major hedge funds anticipating the stock to fall. WallStreetBets, a Reddit group, noticed this trend and started buying call options on the stocks, pumping the asset over the week. Since there were many short positions, many short holders struggled to stay afloat, resorting to either closing their positions or using funds to help. Strong trading demand and uncertainty about the legitimacy and risk of GameStop’s price action prompted many brokerages to begin closing down the trading of GME across the U.S.
WallStreetBets’ exploits also did not go unnoticed by the US SEC, which announced that it will take a close look at how Robinhood handled the trading of GME stock on its platform.
Crypto analysts cum economist, Alex Kruger said on the situation:
“Great thread on WSB and RobinHood. The problem: the system is rigged. The solution: Decentralized Finance. It doesn’t get any clearer than this.”
Why It May Be the Turn of Decentralized Finance (DeFi) and NFTs To Shine
As retail confidence in the stock market is threatened, DeFi developers are advocating an alternative system.
When it comes to the need for an open, unstoppable, permissionless financial architecture, DeFi, by comparison, is seen as trustless and fair because it doesn’t make decisions about whether users can transact or not. Instead, the qualifications required to interact with different platforms, be it Uniswap on Ethereum or another app are based on their ability to pay transaction fees.
Even if the GameStop saga doesn’t channel capital directly into DeFi, many have concluded that it shows how much room the DeFi space needs to grow.
Total Value Locked (USD) in DeFi
Courtesy: DeFi Pulse
The DeFi sector, however, continues to take over space, with projects such as Aave, SushiSwap among the top gainers so far in 2021. Isa Kevligan, marketing manager at Aave, said “DeFi is just getting started.”
NFTs, which are non-fungible tokens, is a relatively new sector of the Cryptosphere. These types of tokens allow nonfungible assets, virtual or physical, to be digitized, making it easier to prove ownership, transactions, and sales. NFTs are often used to represent in-game items, digital artwork, and more.
During 2020 alone, NFTs seem to have captured the imaginations of crypto enthusiasts around the world, primarily because they enable the simplification of digital data ownership in a highly streamlined and efficient manner.
Various blockchain-based digital collectible card games are now available online. They allow players to work in a fantasy landscape, even allowing them to create a range of new items, collectibles that can then be used in-game in exchange for a wide range of digital gifts, or even sold in various markets for cash rewards.
There seems to be a synergy between NFTs and decentralized finance, where DeFi concepts like decentralized trading can be applied to the NFT sector and NFTs, can be used to gamify DeFi applications. This synergy explains why NFTs can grow further in 2021 alongside DeFi.
Image Credit: DeFi Pulse, Shutterstock