The US Securities and Exchange Commission will inevitably scrutinise the trading in GameStop to see whether the chatroom conversations and the buying involved any elements that could be construed as market manipulation.

Those of the Reddit crowd still on the register are being urged within the chatrooms to hold their nerves and rekindle the squeeze to drive the price back up ($US1000 a share seems to be the popular target). Even billionaire Mark Cuban is encouraging them to maintain the rage.

The problem with that strategy is that the big short sellers have already covered their exposures. There’s no-one left to squeeze.

The short positions in GameStop,which had topped 100 per cent of the free float,have been slashed by about two thirds,and the likelihood is that some of the remaining shorts were taken out when the prices were in the stratosphere. There’ll be hedge funds now sitting on major gains.

With the most vulnerable hedge funds gone,there’s nothing much left to squeeze – the intense pressure for the short sellers to close out their positions by buying GameStop shares even as the price soared has evaporated.

If there’s no forced buying and the only support for the price is from retail investors the price should gradually retreat towards its fundamental value,which - for a shrinking bricks and mortar video game retailer - is nothing like $US90 a share,let alone $US483 a share,which gave the company a staggering market capitalisation of $US24.24 billion. (It’s now back to $US6.3 billion.)

This is going to be a painful lesson for newbie investors. The slick new no-fee brokerage platforms like Robinhood might make trading in shares and options appear to be another form of gaming but some of the Reddit-encouraged horde will have lost their life savings.

It’s also been a painful lesson for the platforms,particularly Robinhood. It was forced to restrict trading in the most targeted stocks and raise $US3.4 billion of new capital so that it had sufficient cash to provide collateral to its clearing house for its customers’ trades.

The direction from its clearing house and the forced restrictions on trading to limit its capital requirements are a reminder to Robinhood and the users of the platform that there is actually a lot of regulation and plumbing in the financial system that sits behind the trades.

Robinhood,which plans to float this year,might initially have been overjoyed at the trading volumes and activity the assault on the GameStop shorts were delivering to its platform. Its forced capital raisings,on terms that reflected the urgency of its need,are also a reminder that in financial services growth is capital-intensive.

As with short squeezes,we’ve seen analogous “aberrational” moments before. They generally don’t end well.

If the GameStop experience isn’t replicable unless there are hedge funds out there stupid enough to ignore the lessons learned,then it isn’t much of a foundation for an anti-Wall Street/anti-establishment protest movement,or for a continuing conflict between retail investors and the big end of town.

That won’t stop the regulators and politicians from holding hearings and investigating,as they should,what transpired.

The business model for online brokerages and the potential for conflicts (Robinhood makes it money selling its customers’ order flows to market makers,the biggest of which also contains a hedge fund) might be one target for review,as might the capital adequacy requirements for brokers and the systemic implications of events like the GameStop squeeze.

The laxity of America’s short-selling regime could also come under scrutiny,along with the promotion by brokerages of options and margin loans to unsophisticated investors.

At a macro level,the episode will heighten discussions about the unintended but very obvious consequences of near zero-cost funding and the open-ended access to ultra-cheap funding created by central bank monetary policies.

Along with asset price bubbles that are continuing to swell,the GameStop episode has an element of the “madness of crowds” that is usually the precursor to something really unpleasant occurring within financial markets.

As with short squeezes,we’ve seen analogous “aberrational” moments before. They generally don’t end well.