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Topline
The value of silver skyrocketed to an eight-year high Monday as an army of Reddit traders target precious metal commodities in an attempt to mirror the mindblowing share rises in heavily shorted companies like GameStop, BlockBuster, and AMC and the value-spike in cryptocurrency Dogecoin, a strategy that has divided the community and prompted allegations that Wall Street is somehow coordinating calls for investors to pour into silver.
Reddit-informed retail traders have caused silver prices to spike to an eight-year high. … [+]
Key Facts
Silver prices surged by more than 10% to over $30 an ounce Monday morning as Reddit-informed retail traders piled in on the commodity, the highest since February 2013.
The ambitious strategy has divided groups coordinating the buying frenzy, such as Reddit’s r/WallStreetBets forum, with some users arguing that a surge in silver will hurt large institutional investors and others contending that the “silver squeeze” is a plan hatched by Wall Street to take attention away from shares like GameStop.
“The Silver Squeeze is a hedge-fund coordinated attack so they can keep fighting the $GME fight,” one user posted on r/WallStreetBets (GME is GameStop).
Traders have also poured into mining firms and coin-selling sites warn of delays in delivering silver amid unprecedented demand.
Silver is not as straightforward to trade as the shorted companies or cryptocurrencies that have proven popular among Reddit traders — silver’s $1.4 trillion market capitalization is several orders of magnitude greater than GameStop’s (which was about 1.4 billion before the Reddit frenzy) and a significant proportion is off-exchange, meaning it is not easily traded online.
Key Background
Armies of retail investors, determined to challenge Wall Street’s financial hegemony, have helped drive up the stock of struggling companies like GameStop, AMC, BlackBerry and even Blockbuster, spurring massive losses for the hedge funds who had shorted the stocks. Many have also piled into the one-time-joke cryptocurrency Dogecoin, which was inspired by a viral image of a Shiba Inu dog. At various times, Robinhood has suspended purchasing for some meme stocks, a move that sparked almost universal outrage prompting angry consumers to tank the app’s rating on online stores with a flurry of one star reviews and politicians vowing to investigate. At its peak, Robinhood restricted trades from 50 companies, including GameStop, AMC Entertainment, BlackBerry and Nokia.
What To Watch For
Robinhood’s faced major backlash and several lawsuits for restricting trading of some meme stocks. Speaking to Elon Musk on the social media platform Clubhouse, CEO Vlad Tenev said the platform had to suspend the trading of volatile stocks after clearing firms — which help resolve all transactions on Robinhood — demanded extra capital to help offset the high volume of transactions being processed. National Securities Clearing Corporation (NSCC) asked the company to put up $3 billion in collateral, forcing the app to curb some stocks. This demand was later lowered and the company raised over $1 billion from investors.
Further Reading
‘It’s Doge Time’: Dogecoin Surges As Reddit Traders Push To Make It The Crypto GameStop (Forbes)
Robinhood CEO: We Made The ‘Correct’ Decision In Restricting GameStop Trades (Forbes)
Robinhood Will Restart ‘Limited’ Trading In Meme Stocks GameStop, AMC As Reddit Rally Unravels (Forbes)
Robinhood’s Trading Freeze Unites Political Foes From Cruz To Warren — And They’re All Angry (Forbes)
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