Vlad Tenev, Robinhood’s CEO, very much occupied the hot seat in today’s hearing before the House Financial Services Committee over January’s market volatility.
None of the representatives seemed particularly interested in putting the screws to Reddit CEO Steve Huffman, and many seemed to give Keith Gill the same props the rest of us did.
These aren’t the market manipulators you are looking for
Gill, in all fairness, was the most likeable character involved, introducing his remarks by saying “A few things I am not: I am not a cat and I am not an accredited investor.” Gill, who really started this chain of events by posting about his investment into GameStop in June 2019, even doubled down on his opinion that GME remains a good buy today, at current prices. This is despite the fact that wild GME trading has attracted criminal investigation.
That lack of scrutiny towards Gill and Huffman does much to quell widespread fear that the events surrounding explosive trading in GameStop (GME) shares at the end of January would kick off probes into social media platforms’ role in potential market manipulation.
This is even as the House Antitrust Subcommittee announced today more hearings to scrutinize the biggest players in social media. Reddit, for now, seems to have flown under the radar.
Congressman Warren Davidson, who sits on the committee, noted this rare area of consensus, telling Cointelegraph: “I was hopeful right out of the gate because early on in the news cycle AOC was sticking up for the Reddit users, saying these people should have a right to trade. And then Ted Cruz, on the other end of the political spectrum said, ‘well, we agree.’”
Tenev’s business model
Though broadly, Republicans were more lenient than Democrats in addressing Robinhood’s activity, and especially the firm’s controversial shut-off of buying but not selling of GME and other high-volatility stocks, everybody wanted answers from Tenev.
The nature of Robinhood’s revenue model, which is based on the sale of order flow, while advertising itself as commission-free, fell under mass scrutiny, as did it’s dependence on a $3 billion injection of capital to meet collateral requirements.
“I believe a vulnerability was clearly exposed in your business model,” said Congressman Anthony Gonzales while questioning Tenev. “We just can’t live in a world where my constituents can have their shares liquidated if you can’t make a capital call.”
Many called out Robinhood’s claims to be busy democratizing finance. Tenev consistently pushed the figure of $35 billion as Robinhood users’ total gains, which Rep. Jim Himes said “you and anybody else schooled in finance know is meaningless without a rate-of-return.”
But while today’s hearing revealed a lot of hostility towards Tenev, it wasn’t all that educational.
Despite Chairwoman Maxine Waters’ admonition that “This is not political theater at all,” there didn’t seem to be any concerted sense of solutions to the epic trading that fueled GameStop’s (GME) meteoric rise at the end of January.
Real-time solution?
Some proposals, including from Tenev himself, as well as Davidson, were that the situation would not have developed at all if the U.S. had trading that settled the day of, rather than two days later — termed T-0 rather than T-2. Tenev noted “The existing 2-day period to settle trades exposes investors and the system to risk.”
Kenneth Griffin, CEO of Citadel, which he described as “the largest market maker in the world,” disputed the likelihood of a real-time system for securities trading in the next several years, saying: “The issue is everything has to work perfectly.” Real-time trading, he said, “requires that every bit of the workflow is perfectly synchronized across the parties.” Davidson disagreed, saying “Clearly in your business the technology exists for trading firms that are engaged in high-frequency trading.”
Davidson noted the potential role of blockchain. The potential of security tokens to solve issues with intermediaries and brokers has been one of the long-promised benefits of blockchain, though that is changing.
Today’s hearing was just the beginning, Chairwoman Waters affirmed
Riot Blockchain stock plunges 20% following parabolic rally
The crypto mining company has been on an absolute tear this month. On Thursday, the stock corrected sharply lower
Shares of crypto mining company Riot Blockchain (RIOT) plunged on Thusday, giving back a portion of a parabolic rally that was largely driven by news of a major boost in hash rate capacity.
RIOT fell 20.4% to close at $62.03 on Thursday but was moving slightly higher in after-hours trading. At current values, RIOT has a total market capitalization of $4.2 billion, making it one of the largest companies in the blockchain industry.
The sharp pullback follows a more than doubling in price between Feb. 10 and Feb. 17. The weeklong rally saw RIOT peak just below $78.00 before Thursday’s pullback.
Since the beginning of the month, Riot’s stock price has gained a whopping 202%.
RIOT began its most recent parabolic rally shortly after the company announced it expected to achieve a hash rate capacity of 1.06 exahash per second with the deployment of 2,002 S19 Pro Antminers.
On Feb. 11, CEO Jason Les said:
“While we are proud of this accomplishment, we view it as the successful completion of just one of many steps of our ongoing growth plan. Riot continues to receive and deploy next-generation miners from Bitmain and remains on schedule to more than triple our currently deployed capacity by the fourth quarter of 2021.”
Just a few weeks prior, the company said it planned to achieve a hash rate capacity of 3.8 exahash per second by the end of 2021.
When Cointelegraph last covered Riot Blockchain in Nov 2020, the stock was trading at $6, having gained 500% on the year. At the time, the Colorado-based company had appointed Hubert Marleau, the former director for the listing committee for the Toronto Stock Exchange, to Riot’s board of directors