The flash mob that won the prize from GameStop Corp. and other strongly short-short stocks, surprised Wall Street. In the cryptocurrency market, such behavior is commonplace.
Groups of investors who organize on social media and target a specific asset – often one that is small and illiquid enough to be easily influenced – are a staple of the crypto world. While digital currencies have made their way to professional investors, they are also still subject to pumping systems spreading on social media platforms such as Discord and Telegram.
The prevalence of such tricks, stretching back nearly a decade to the early days of the crypto industry, suggests that the GameStop mania on Reddit’s WallStreetBets forum may not be an isolated event in the stock market. A similar, temporary peak also occurred in the silver market last week.
“It’s definitely an awareness among small retailers that there is power in numbers, and that comes from crypto,” said Kain Warwick, the founder of Synthetix, a crypto-focused derivatives platform. “We realized that a long time ago.”
Another similarity between crypto and WallStreetBets: Free tools, such as online trading apps and bulletin boards, promote what early bitcoin adapters called the democratization of finance. Bitcoin was created 12 years ago as a decentralized currency that would be free from the intervention of bankers and other intermediaries.