Massacre! Retail investors banding together in silver are brutally "textbook" hunted, evaporating 40% in three days. Will your $BTC, $ETH be next?

Last Friday, a Reddit user wrote in a forum that he lost an entire year’s after-tax salary in one day. A few days ago, silver was still regarded as a totem for retail investors fighting against Wall Street, with forums full of “diamond hands” memes, vowing to send it to the moon.

The celebration ended within three days. Silver prices plummeted from over $120 to a 40% decline, leaving a cliff on the chart. For retail investors who bought at high levels, this was not a correction, but a slaughter. That land of dreams of getting rich quickly ultimately became a “mass grave” burying them all.

How did all this happen? When we talk about “short squeeze,” Wall Street’s big sharks had already opened their bloody jaws.

In the silver market of January 2026, rationality was completely gone. Data shows that in January alone, individual investors net invested a record $1 billion into silver ETFs. On January 26, the trading volume of a single silver ETF reached $39.4 billion, nearly matching the S&P 500 ETF. The popularity of a metal ETF nearly rivaled the US stock market.

Market analyst Rhona O’Connell pointed out at the time that silver was severely overvalued, caught in a self-fulfilling frenzy, like Icarus flying toward the sun, destined to burn. Social media was the accelerant for this frenzy, with related posts skyrocketing to 20 times the five-year average. Retail investors tried to drown the fundamentals with their funds but forgot that silver’s nickname is “steroid-enhanced gold,” making its rises and falls extremely volatile.

On January 30, the disaster struck. Silver experienced an epic sell-off within hours. Media quickly pointed fingers at Kevin Woor’s nomination as Federal Reserve Chair, claiming that hawkish stance was bad for precious metals.

But details revealed the truth: the nomination was announced at 1:45 PM, but the crash had already begun at 10:30 AM. Three hours before the announcement, prices had already dropped 27%. The Fed nomination was just a smokescreen; the real “killing tool” was margin.

A week before the crash, the Chicago Mercantile Exchange (CME) raised silver futures margin requirements twice, totaling a 50% increase. This meant that a leveraged retail trader holding a full position might suddenly need to add tens of thousands of dollars. Unable to meet the margin call? The system would automatically liquidate positions at any cost.

The margin hikes triggered the first round of forced liquidations, which caused prices to fall further, leading to more liquidations—a vicious cycle. Retail investors were at the bottom of this cycle.

While retail investors were crying out, what were the institutions doing? They were waiting to sell off their holdings at a profit. This is not illegal; it’s rooted in the asymmetric advantages of market structure.

Some analysis revealed the “textbook” operations of institutions during this crash. Step one: obtain emergency liquidity. While exchanges increased retail margin requirements, banking institutions borrowed a record $74.6 billion from the Federal Reserve’s emergency lending window. This tool is designed to prevent a liquidity crisis but is only accessible to certain institutions. Retail investors cannot access similar central bank financing channels.

Step two: sit back and watch the market chaos. The sudden 50% increase in margin requirements put direct cash pressure on retail traders, triggering automatic liquidations. Meanwhile, institutions with access to Fed tools had more time and flexibility to manage their positions. Retail traders sold their positions at the worst prices in panic, while institutions strategically disposed of theirs.

Step three: exploit privileged arbitrage. Take a major bank, for example, which is both the largest physical holder of silver in a fund and an “authorized participant.” On the day of the crash, the ETF’s share price showed an abnormal 19% discount to net asset value. The authorized participant bought ETF shares at a low price and exchanged them for higher-value physical silver. Data shows that about 51 million shares were redeemed that day, implying an arbitrage profit of approximately $765 million. Ordinary investors cannot access this kind of operation.

Step four: derivatives positioning. The bank also held large short positions in silver. When the price dropped to $78.29, records show it took over 633 contracts, taking in 3.1 million ounces of physical silver.

All four key steps happened almost simultaneously. Was Wall Street orchestrating this series of events? Cannot be confirmed. But they are structurally positioned to benefit in multiple ways simultaneously, a role combination and authority that retail investors do not possess.

In this market, countless retail investors lost years of savings. Analysts are right—silver is forever a death trap. Financial markets have never been a fair arena. When retail investors try to challenge the steel machine composed of algorithms, leverage, and rule-makers with “sentiment” and “memes,” the outcome is predetermined.

Silver is not GameStop; it is an even more brutal battlefield. Retail investors think they are charging at Wall Street, but in reality, they are digging their own mass graves and lining up to jump in.

This structural disadvantage also exists in the crypto market, just in different forms. Whether it’s precious metals or $BTC, $ETH, understanding the game rules and your position is far more important than chasing narratives and emotions. The real moat is cognition and risk management.

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