GameStop Frenzy Echoes Sharp Moves Long Seen in Cryptocurrency Markets

The flash mob that drove up the price of GameStop Corp. and other heavily shorted stocks took Wall Street by surprise. In the cryptocurrency market, such behavior is commonplace.

Groups of investors who organize on social media and target a specific asset—often one small and illiquid enough to be easily influenced—are a staple of the crypto world. Although digital currencies have made inroads with professional investors, they are also still subject to pumping schemes that proliferate on social-media platforms like Discord and Telegram.

The prevalence of such ploys, going back nearly a decade to the early days of the crypto industry, suggest that the mania surrounding GameStop on Reddit’s WallStreetBets forum may not be an isolated event in the stock market. A similar, temporary spike also occurred last week in the silver market.

“It’s definitely an awakening of small retail traders that there’s power in numbers, and that’s come 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, like online trading apps and message 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 interference of bankers and other middlemen.