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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
it’s like the thing visa talks about but both funnier and darker
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Charlie Warzel
@cwarzel
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the only thing i can think about with the gamestop thing is that there are so many elements of modern life that can be manipulated (for good or ill) if enough ppl are able to commandeer enough attention. and we have so many ways for normal ppl to gather attention at scale now
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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
oh shit this is a deeper story than i expected
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Toxic
@toxic
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Step 0: Citadel pays Robinhood for order flow. Citadel gets to see RH's orders a few milliseconds before they're filled. Citadel may choose to front-run some of those trades. Step 1: RH's customers and WallStreetBets start manipulating $GME. This is happening in the open.
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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
hmmmmmmmmmm
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Toxic
@toxic
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Step 2: HFTs buy shares ahead of Robinhood users. Remember Citadel, the firm who can front-run robinhood trades, and got to see all of that RH data a little early because they paid for flow? Yeah. When do you think they started buying $GME in front of RH traders on momentum?
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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
hmmmmmmmm
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Toxic
@toxic
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Step 3: A hedge fund becomes insolvent. Today it was Melvin Capital Management. It very likely won't be the last. Melvin immediately sells off a portion of itself, because it needs the influx of cash or it will vanish in a poof of smoke, vaporizing ~$15 Billion in the process.
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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
hmmmmmmmmmm
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Toxic
@toxic
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Step 4: Who's the lead investor, picking up part of a usually successful fund at fire-sale prices? Right. Citadel, probably with some of the cash they made by repeatedly profiting in the milliseconds before filling the trades that collapsed this fund. wsj.com/articles/citad
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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
hmmmmmmmmmmmmmmmmm
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Toxic
@toxic
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Step 5: Citadel still has access to RH order flows, is still allowed to front-run them and/or pocket the spread, and can use that and other information to determine the next over-leveraged fund that's going to get squeezed. They might even be able to accelerate the squeeze.
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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
matt levine killing it as usual but also i am running out of free bloomberg views rip
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Andy Matuschak
@andy_matuschak
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I am not sure what special award the internet can give to @matt_levine which would match the value of his commentary on the GameStop madness, but whatever it is, I would like to vote for it. Links to the past few episodes from today’s if you’ve missed: bloomberg.com/opinion/articl
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QC (in Berlin 7/29-??? w/ COVID 😷)
@QiaochuYuan
hmm this generated a vague thought i'm having trouble putting into words about the internet as the global brain, something something information cascades, something something system-wide updates
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Alex Danco
@Alex_Danco
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(running in exhausted) OK I'm here I have the take The actual story of Gamestonk isn't that Redditors figured out how to do financial mayhem It's that we're learning how to Do Reflexivity and just wait until this starts to happen to political campaigns alexdanco.com/2021/01/28/r-w
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