A cybersecurity firm has found that the GameStop stock frenzy that shocked the world a few weeks ago was driven by bots. According to the report, bots were used to promote and hype up the stock on social media. The Massachusetts-based firm PiiQ says there were tens of thousands of bots on Facebook, Twitter, Instagram, and YouTube working tirelessly to hype up the stock.
Despite this, the firm couldn’t say just how much influence the bots had on the stock price rally we saw for GameStop. In January this year, GameStop stock skyrocketed after a bunch of Reddit users banded together to buy it. At the time, it had emerged that huge hedge funds in Wall Street had shorted the GME stock.
In essence, this means that these funds were anticipating the stock to lose value. But the rally we saw in January, done primarily to stick it to these huge funds, sent GME stocks up by nearly 500%. As a result, funds that had shorted these stocks lost billions of dollars. However, it’s emerging that the rally was caused by more than just passionate video game players on Reddit.
The PiiQ report confirmed that there were patterns of artificial behavior detected here between 28th January to February 18th. But the report should still be taken with a tinge of doubt. PiiQ notes that the bot-related activity came from social media platforms. However, the company did not analyze traffic on Reddit. In essence, PiiQ conclusion is based on bot activities reported on other social media platforms like Facebook or Twitter.
But anyone who has followed the rise of GME stocks would know that the rally was largely driven by users on Reddit. Without analyzing traffic on the forum, then it would literally be impossible to say that bots were responsible for the rise of GameStop.
As a matter of fact, Reddit CEO Steve Huffman noted during a hearing with the House Financial Services Committee that it had analyzed all the GameStop-related traffic on its platform and found no evidence of bots being used. These were relay people that had decided to join hands and squeeze out large hedge funds.
The move by these Reddit users was unprecedented. For so many years, there has always been this feeling that big hedge funds have always benefited from the stock market at the expense of small retailer investors. Many people who followed this saga saw it as the ultimate role reversal. For the first time in a long time, the little guy had won against the big banks and funds.
Despite this, there’s still a lot of controversy surrounding the issue. Professional hedge fund analysts believe that the act of banding together and buying stock to push its price up is more or less market manipulation. But others believe that these retail investors did what hedge funds have been doing for years. Nonetheless, there is still an investigation by the Securities and Exchange Commission coming and we will know more about what transpired in due time.