Are There Any Historical Examples of Social Media Sentiment Directly Causing a Crash in Derivatives Markets?

While it is difficult to prove direct causation, there are instances where social media sentiment has been a significant contributing factor to extreme volatility and crashes in derivatives markets. The GameStop saga of early 2021 is a prime example.

A surge of coordinated buying pressure, fueled by discussions on Reddit's r/wallstreetbets forum, caused the stock price to skyrocket. This, in turn, inflicted massive losses on hedge funds that held large short positions, leading to a "short squeeze" and extreme volatility in the options market.

While not a traditional crash, this event demonstrated how social media sentiment can overwhelm traditional market dynamics and cause a rapid, localized collapse for certain derivatives positions.