Ever since, GamesStop has fallen to around USD 50 even as the frenzy created wealth for some and destroyed for many.
What are the fears arising out of this?
– The price volatility arising due to’ meme stocks’ has brought in higher risks in the market. Brokers and clearinghouses face unprecedented trading volume spikes
– These frantic fluctuations have reportedly made novice traders feel confused and left out. Lack of training but urge to make quick bucks is forcing these traders to take help from social media stock forum postings.
– In trading, it can also cause massive gyrations as it can shape opinions and narratives, laeading to a retail bubble that can potentially cause huge losses.
– Available for free and to everyone, social media platforms are dominated by amateurs and could also fuel herd mentality.
What lies ahead?
Dan Kim, Georgetown University, accounting and computer science, wrote for the WSJ that the antidote, however, is the educated individual, not the hammer of the state.
The way there are influencers for food, fashion, beauty, parenting etc on social media now there are finance and stock market experts on Instagram and Youtube who are spreading financial literacy to people eager to earn a quick buck at the markets. Locked away behind screens, with more time and, sometimes, tight money, investor interest has led to a two-times growth in traffic for these channels and pages over the past 10 months.
Also, with sizeable increase in the number of retail investors, it is only fair to assume that social media-led purchasing and newer meme stocks coming up is what lies ahead.