The recent GameStop/WallStreetBets saga and stories of influencers endorsing stocks on Twitter reveals the increasing influence of social media on markets, a trend that is set to continue, as Evgenii Tiapkin, Executive Director of Freedom Finance Europe, explains:
“The news sentiment trend is becoming increasingly stronger, as most people always have their mobile devices with them and check Twitter and other media feeds 24/7,” explains Evgenii Tiapkin, Executive Director of Freedom Finance Europe.
“In 2017, Bitcoin was trending. In 2018, Kylie Jenner brought down Snapchat stocks. In 2019 and 2020, Trump was the main trouble for Twitter. While in 2021, Elon Musk has taken the lead. Millions of people are following these celebrities, public figures, and opinion leaders on social media, so there’s no wonder that such trends have also started influencing the stock market.
“This trend has only been exacerbated with the pandemic, lockdown, and work from home policies. In addition, in recent years, robotic algorithms based on neural networks became able to trade based on popular trends. This is why celebs, such as Musk, are being continuously monitored, while the popular media titles are being heavily analysed. The results may of course differ, as the algorithms may make errors to companies with the same trading symbols.
“The GameStop (NYSE:GME) and WallStreetBets case, however, was a unique one. As no other Reddit intervention has ever had such an impact. The market did not like this at all, though it is still difficult to say whether such things will become normal in 2021. It was clear that there was a breach in the system, and now both brokers and exchanges are making every effort to fix it. We believe that, although the impact of the media and social media on the stock market will become stronger in 2021, the regulatory authorities will also get stronger and won’t leave a chance for another GME event played by retail investors.”