The recent month has been big limelight on the Stock Market and cryptocurrency. The words GameStop, Reddit, BitCoin, DogeCoin are the buzz words and a lot of influencers are talking about how they are making profits from these. My goal in writing this article is to view the situation from a different perspective and provide a new angle to the readers to analyze the current situation.
Briefing the GameStop scenario in Layman terms, what did actually happen there and how did its stock get up. GameStop is a street shop that sells games, consoles, and other electronics. The company wasn’t doing much good financially and was not even something anyone would talk about. Two guys on Reddit started talking about the stocks of GameStop in a thread, and started a chain of it, spreading a wave of information that the stock price of GameStop is going to go up. The chain spread as the Reddit community is such a fast and volatile platform. People started buying a ton of stocks and started posting about how much they bought, all their friends viewed the posts and started buying more and the chain went a long way. 1% of the total Reddit Users invested in GameStop and this way they created a bubble that went high enough to get the limelight and caused chaos.
So, what did the company do? The answer is nothing. The company did nothing, it was just because of a chain and manipulating people’s sentiment in the stock market. The chain was successful as it helped to get the belief of so many people in the stocks of GameStop. The sentiments of the people and the heavy investment were powerful enough to crash the Wall Street millionaires. One could go into detail about how much money did people lost and how some Redditors influenced everything, you will find various articles about that. My goal is to throw light on how did it all begin. The 2 Redditors could have easily talked on a phone call or direct messaging, but no they did it on a public thread, purchased stocks, and posted about it. Starting the massive chain, the chain was powerful enough to win people’s belief and everyone wanted to earn fast cash and thus tons of stocks were getting purchased.
That’s the power of social media, right there. Getting people’s beliefs to something was enough to make an enormous amount of money within a day. I would like to consider one more such event which had occurred recently. Elon Musk tweeted that he had invested 1 billion dollars in BitCoin. Elon Musk is right now the influencer who could make something go from 0 to 100 real quick.
His one tweet which consisted of 2 words “Use Signal” was enough to upraise the stock price of Signal App from 0.5 $ per stock to 6$ per stock. That’s 12 times growth. He tweeted it when WhatsApp laid out its new data privacy policies.
Back to the BitCoin investment story, his tweet about such a heavy investment got so much attention that people went crazy and started to invest in BitCoin. People believed if the richest man on the planet is investing in something, obviously it would be a great investment and will get them huge returns. One week later, the bitcoin price went to $54,000 from $44,000. Elon earned a profit of more than a billion dollars in one week. Reframing the statement, Elon earned more profit in one week from BitCoin than the complete Tesla sales of the year 2020.
So what was it again, people’s sentiments and beliefs. I do want to throw an analogy about how stock markets are like democracy, in Democracy the people choose whom to elect, well the guy who has people’s beliefs will win the elections. A similar kind of reaction can be interpreted in the stock market as well. There are no laws yet to control this and thus the Social Media power is an infinity stone that could be controlled by anyone.
In this era, if you are not talking on social media, you do not exist. My goal of the article was just to give a brief perspective to look at the current state of the world in a different way. People need to be aware of such strategies in order to make the right moves. You could read about the GameStop situation causing losses and get the knowledge about what I mean by “right moves”.
Thank you for reading.