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Comment by yreg | Hacker News Reader

Presumably the crash would occur after the GME price skyrockets and shorts (and then their brokers and clearing houses) go broke trying to close the short positions.

The insurance pays up if they buy your share.

Do you have another idea how it could end?

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It could end by simply crashing without shorts going broke. There's not much reason to believe a larger short squeeze is forthcoming.

Why would that crash the entire stock market?

The theory I've seen is that there could be hidden systemic risks here. If GME tanks suddenly, there's some possibility that traders bailing out of their trades will take down Robinhood (who doesn't seem to be very healthy right now), and a major broker collapsing is never gonna be great for the market.

I share your skepticism that it would actually happen this way, but it seems at least somewhat plausible.

Robinhood are tiny on the brokerage stage. Important to retail, barely matter otherwise. That’s my understanding at least

That seems consistent with what I've read recently. Good news.

It's got nothing to do with Robinhood. If a hedge decides to cover the short so they don't have to admit defeat and go bankrupt, then the entire market goes down because they'll end up selling thousands of unrelated shares for their cover.

You've fallen victim to some common misinformation that's spreading. Multiple hedge funds have already been able to cover their shorts, and there's not much reason to believe this will change.

Not an endorsement but this was retweeted by Kai Ryssdal: https://twitter.com/TheStalwart/status/1355531873896824834

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