How Does Social Media Sentiment Amplify Panic Selling in Derivatives Markets?

Social media sentiment acts as a powerful amplifier of panic selling in derivatives markets by rapidly disseminating unverified information, rumors, and emotional reactions. The viral nature of platforms like X (formerly Twitter) and Reddit can create a feedback loop where fear and speculation spread exponentially, influencing a large number of traders in a short period.

In derivatives markets, where leverage is common, this amplified panic can trigger cascading liquidations. As margin calls are initiated due to falling prices, forced selling occurs, which further drives down prices and triggers more liquidations, creating a domino effect that is significantly accelerated by the real-time, emotionally charged information flow on social media.