A new army of social media-enabled day traders helps drive stocks to records and turn companies into market sensations.
As trade by individual investors grew during the coronavirus pandemic, so has the popularity of the online communities where they gather. Platforms such as TikTok, Twitter, YouTube, Reddit, Instagram, Facebook and the Discord messaging platform have become the new Wall Street shopping counters. Individual investors come together to talk about hot stocks like Tesla Inc., brag about profits and commit to losses.
These investors do more than just talk. They rely on the ideas and operations of others, helping to drive the momentum that has driven some companies to earn three digits or more in 2020.
“People are in love [some stocks] and they enter these echo chambers, where everyone shouts, “We’ll buy Tesla forever!” said Blake Bassett, a 31-year-old dealer who started operating several years ago. “People post all day like it’s a football game.”
And while online debates among investors aren’t necessarily new, in the late 1990s stock-chat Internet chat rooms helped keep the technology bubble afloat, social media is more widespread than ever. Meanwhile, this has coincided with a shift across the industry to trade without commissions, while most brokers have facilitated participation in risky instruments such as options.