Thesis: Suppose a sufficiently large number of people believe that the market is going to crash one day. Robinhood has just shown us that it will consider locking up everyone's accounts and prevent a sell off while the rest of the market cleanly exits after cutting their losses.
Robinhood investors will be left holding the bag once Robinhood reopens trading for the plebians.
The problem here is that game theory completely mess the incentives, everyone needs to play chicken (or buy out the ones selling) or everyone loses on potential profit. But if just a few people trigger a sell out, everyone loses.
It's a very strange Mexican stand-off and my take is that is held, for now, by anger and excitement to see what happens when the shorts have to cover. When the shorts start buying and driving the price up we will see how many are able to hold (and up to what point).
This is quite fascinating to me, game theory would predict this shouldn't have happened with so many different players with conflicting interests.
Long story short, the clearing house (similar to when you buy a house) assesses risk and assigns terms based on that. The risk got so high that RobinHood couldn't cover it or their clearing house couldn't cover it anymore.
Whether or not the clearing houses are in bed with these brokerages remains to be seen.
I was also pitchforks out earlier today, and willing to move to webull all my stocks, but then I did more digging and this seems more reasonable. RobinHoods press release was garbage tho.
https://news.ycombinator.com/item?id=25950191
Link to the video from the OP. https://finance.yahoo.com/video/heres-why-robinhood-restrict...