WallStreetBets founder on GameStop: There is no precedent for this

On the way up, buyers make money and sellers lock in profits.  This is just traders duking it out.  Nobody told hedge funds to do naked shorting (selling shares you don't have and can't borrow) which results in adding more shares to the float than should exist.  Normally you'd have to borrow shares from a broker who holds them in someone's account and sell them, with the promise to return them at some point in time.  If the stock price drops then it will cost you less to replace the borrowed shares than the price at which you sold them.  A hedge fund may also be a broker, thus they are able to sell shares they don't own and haven't borrowed.  So, if the companies float is 100M shares, the hedge fund can just keep selling shares into the market, the resulting dilution should cause the price to drop making an easy surefire win for the hedge fund.  But, here they got caught, investors working on boards saw that the shorters had sold quite a bit of stock hoping the price would fall because the company wasn't able to earn any money.  

The investors decided to buy and keep buying.  Soon the short sellers had sold 120% of the float, meaning that if the price went up, they'd have a devil of a time getting out (known as a short squeeze) or covering their shorts.  As the weaker short sellers were unable to pay the cost of maintaining their short sales their brokers would then "buy them in". Where the broker places an order to buy in the borrowed stock at market prices and any deficit (money owed by the account) would be made up by the broker selling any stocks in the investors' account.  If that didn't satisfy the deficit, the broker can then take your house, car, bank accounts, and anything else of value that the investor owns.  

In this case, the investors saw that so much stock had been sold short that the short-sellers were in a trap, they would need to buy 120% of the float to get out and that's never easy to do if a stock is climbing.  Broker "buy-ins" resulted in increased demand that forced the price ever higher, breaking even more short-sellers and forcing more "buy-ins".  Those who got in early made bundles, on the few boards I visited, some say they'd picked up many tens of thousands of dollars really quick.  Of course, people who get in late take a very big risk as the price will eventually fall precipitously.