[Podcast] The Impact of Social Media on Stock Market Bubble: A Case of GameStop
23 November, 2024
Keywords: Social Media, Stock Market Bubble, GameStop, Stock Market, Investment Behavior
The GameStop stock bubble has sparked global interest in how social media affects financial markets. This event has revealed the potential of online communities to drive up the stock market through spontaneous and viral investment behavior. In this research article, the author from University of Economics Ho Chi Minh City (UEH) has illustrated the impact of social media on stock market bubbles through the case of GameStop; concurrently, providing insights into the power and risks of social media in the modern financial context.

In early 2021, shares of GameStop – a struggling video game retailer – suddenly exploded with an unprecedented spike in price, far beyond the normal rules of the market. This event became a phenomenon as the social network Reddit, especially the subreddit forum WallStreetBets – where participants discuss stock and options trading, created an investment movement that led to a “short squeeze” – a phenomenon when short-selling investors are pressured to buy to reduce losses, pushing stock prices up rapidly. Beyond a single event, this case affirmed the potential power of social networks, especially when they can create financial bubbles and cause strong fluctuations in the market.
The question is how social networks affected GameStop’s stock. What were the driving forces behind this phenomenon? More importantly, how do we understand the power of online communities in the current financial investment context? This study aims to provide investors, managers and policymakers with insights into the impact of social networks on financial markets and clarify the risks and opportunities it offers.
What is a stock market bubble?
A stock market bubble is an economic term used to describe a situation where the price of a stock or asset skyrockets because of the unusual dynamics, not based on real business factors. These bubbles are often fragile, leading to a sharp decline in value and causing great losses to investors.
Stock price bubbles are a major threat to sustainable economic growth; therefore, understanding their causes and development is extremely important. In particular, the development of social networks as a powerful communication channel has changed the way investors interact and influence their investment decisions. Interactions on social networking platforms facilitate “Pump-and-Dump” tactics, also known as price bubbles in the cryptocurrency market.
Overview of the GameStop stock bubble phenomenon and the role of social networks
The GameStop stock bubble is one of the prominent financial phenomena in recent years. In early 2021, GameStop (GME) stock skyrocketed from around $4.50 in early January 2021 to a peak of $81.25 in late January 2021 before falling back, fueled by individual investors on social media platforms listed as Reddit, Twitter, and YouTube.
That year, GameStop stock investors on social media used the viral “diamond hand” symbol to represent their steadfast determination to continue buying and holding GameStop stock. They encouraged each other on social media platforms to convey exaggerated views of the stock’s potential value through the use of the “rocket” symbol. In particular, GameStop’s stock spiked when Elon Musk, a social media celebrity and influencer in various fields, posted a link to WallStreetBets, where GameStop’s most active traders were. Coinciding with the increase in attention, attracted through social media, the stock skyrocketed, escalating with large buy orders amid high trading volume and volatility.
Accordingly, social networks are used as a communication channel to create trends and fads, attracting the attention of a large number of small investors at the same time to a certain stock, taking advantage of the increasingly large scale of online social networking platforms. Stock bubbles are causing serious consequences for the sustainable development of the economy in countries, and understanding their formation through the use of investors’ social network interactions is a challenge. In short, it confirmed that the GameStop case not only sparked heated debates in the financial community but also sounded an alarm about the power of social networks in stirring up the stock market.
Causes and motivations of investment behavior on social networks
FOMO psychology and the attraction of the “giant defeating Wall Street” effect: The GameStop case is proof of the power of FOMO psychology (Fear of Missing Out). Witnessing GameStop’s stock price continuously increase, many people decided to invest so as not to “miss the opportunity,” regardless of the risk. In addition, some investors viewed this as an opportunity to “retaliate” against large hedge funds, creating a herd mentality, when thousands of people joined hands to push the stock price up. This proves the power of social media in influencing the emotions and behaviors of individual investors, especially the younger generation, creating a sense of excitement when having the opportunity to participate in a “financial revolution” against large hedge funds.
The influence of external motivation and social media resonance: In addition to financial motivation, social media also creates resonance through inspirational comments, memes and videos. These factors strengthen investors’ determination and make them believe in their ability to “win” against the WallStreetBets forum. Sharing emotions and investment experiences has strengthened confidence in this movement, pushing stock prices to unprecedented highs.
The impact of the GameStop phenomenon on financial markets and individual investors
Short squeeze is a phenomenon when short-selling investors are forced to buy back stocks at high prices to limit losses, causing stock prices to continue to rise sharply. In the case of GameStop, the short squeeze occurred at a very high intensity, when hedge funds did not react to the price increase in time. As a result, GameStop’s stock price increased far beyond its actual value, creating a financial bubble with many potential risks.
The sudden increase in GameStop’s stock created a short-term bubble and many investors suffered huge losses when this bubble burst. This phenomenon has exposed the vulnerability of individual investors in a speculative and risky market. For many, this was a harsh lesson in the importance of thorough research and analysis before making investment decisions.
Furthermore, the GameStop incident has prompted financial regulators listed as the US Securities and Exchange Commission (SEC) to review the role of social media and seeked to strengthen regulations related to online trading. Many experts have called for the need for stricter oversight to prevent rampant speculation and to reduce risks for individual investors.
Policy Implications for Social Media Impact on Stock Market Bubbles
The GameStop phenomenon is a unique event that provides profound implications for both financial markets and individual investors related to the power and the risks of social media. This event not only serves as an example of how social media can create market bubbles but also demonstrates the challenges that regulators face in maintaining market stability. Through research, investors can better understand the risks of unregulated investing and the power of online communities with the purpose of building safer and more sustainable financial strategies.
Therefore, the close connection between different local user communities demonstrates the important role that shared trust plays in the dissemination of information among users despite their previous preferences and ideas concerning GameStop. The findings of this study help investors be better informed and plan for irrational fluctuations in stock prices in the financial market. More importantly, this study can support government agencies in understanding new types of retail investor behavior as well as monitoring and developing successful financial markets and preventing market bubbles.
The full-text article The Impact of Social Media on Stock Market Bubbles: A Case of GameStop can be found HERE.
Author: Dr. Ngo Minh Vu; Associate Professor, Dr. Nguyen Huu Huan – University of Economics Ho Chi Minh City.
This article is part of the series spreading research and applied knowledge from UEH with the message “Research Contribution For All”. UEH cordially invites readers to wait for the next UEH Research Insights issue.
News, photos: The Authors, UEH Department of Communications and Partnership

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