Trading platforms have moved to restrict purchases of GameStop shares after Washington warned of “market volatility” stemming from small investors taking on Wall Street professionals by pushing up the stock of the American video game retailer.

Brokerage Robinhood on Thursday barred investors from buying more shares in GameStop and other listed firms that were being targeted by group users on social media site Reddit. Hong Kong-based Futu Securities followed suit. Selling of the shares was still permitted.

Analysts have warned that rationality has disappeared from stock markets, after a group of retail investors organised via Reddit clinched a rare victory against Wall Street’s short-sellers by catapulting GameStop shares to sky-high levels this week.

GameStop rose by 134.8% on Wednesday, closing at US$347.51. It then immediately plunged by 16% as Washington officials weighed in on “market volatility.” White House press secretary Jen Psaki said that the White House and Treasury Department were monitoring the situation involving GameStop and other companies that had seen sharp fluctuations on the stock market.

Analysts are now on the lookout for the next frenetic moves or the next “GameStop” that will pit social-media-organized buying against major short-sellers and cause huge losses on Wall Street.

“It does feel like rationality and fundamentals are just kind of dead,” J Capital Research co-founder Anne Stevenson-Yang said.

“If you’re short you’re in a very difficult position because you have to buy the stock to get out, so you end with a heavily overvalued stock.”

Greg Taylor, chief investment officer at Purpose Investments, said: “It really just goes to show the classic saying that markets can stay irrational longer than you can stay solvent. So you can try to fight this as long as you want but at some point you just have to give in and just step to the sidelines.”

They were referring to the potency of individual investors grouping together and organising a frenetic buying overdrive on social media to campaign against major hedge funds known for short-selling. Wallstreetbets, using the Reddit platform, is now famous for scoring such a success via GameStop.

In January, GameStop soared by more than 700% after retail investors identified Citron and Melvin Capital Management as their primary targets. Both of them later suffered heavy losses by betting against the video game retailer.

Melvin Capital had since closed out the position and repositioned the portfolio, a spokesperson for the firm said on Wednesday.

Citron’s managing partner Andrew Left said in a video that most of the firm’s short positions were covered at “a loss of 100%.”

Wallstreetbets temporarily denied access to new joiners this week after its shocking achievement, but is now open again.

The recent sharp rallies in GameStop prompted Wells Fargo & Co. to ban its stock advisers from making recommendations on GameStop Corp. and other companies experiencing the same trend.

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