Will Short Squeeze Affect Silver?
Who are Wallstreetbets, and how come a group of rogue Redditors is on everyone’s lips? What is short-selling and will it lead to a reexamining of the silver market value?
This week in finances has undoubtedly belonged to WallStreetBets — a semi-anonymous, self-appointed Reddit collective of small investors. WallStreetBets first targeted GameStop, catapulting its shares from $18 to almost $480 over the course of 4 days, before swiftly moving its focus toward silver just a couple of days later, increasing its value by 20% practically overnight.
The financial market was electrified by the unexpected yet utterly understandable revolt of the Redditors, who collaboratively diverted the market game, hitherto exclusive to the investment tycoons. But how was that possible, and what is the mechanism behind this trading frenzy?
What is a Short Squeeze?
The origin of the Squeeze spectacle has risen as a consequence of the short-selling practice — a perfectly legal yet morally dubious investment model based on speculating a decrease in value of a specific business. Shorting investors borrow a company’s stock, immediately selling it, and — as the said institution marks down its price — return them to the lender, intending to pocket the difference. A fund model, resembling the self-serving attitude of a tiger on the prowl, predating vulnerable businesses, in the hope of benefiting from the market adversities.
GameStop, a high-street game retailer, severely depleted by the pandemic, appeared to be attractive prey for the professional shorters. This time, however, another player joined the game! A group of Redditors operating under the WallStreetBets name decided to step in, propelling the interest in antecedently undervalued shares and pumping its worth far beyond its forecasted price.
Their concerted efforts reached a 2200% increase crescendo on January 28th, generating titanic losses to short-sellers and equally colossal media attention.
A Silver-Tongued Devil
As short-selling became the in-vogue term of the week, silver was suddenly thrust into the WallStreetBets group. The precious metals market responded immediately. A leveraged army of Redditors, interested in the highly undervalued SLV market, quickly jumped on the opportunity. Within one evening, silver reached its eight-year high and touched the $30 barrier for a brief moment, before it started correcting itself.
Was that merely a distraction from the mainstream movement, aiming at the GME? A substantial percentage of WallStreetBets users are undoubtedly qualified to recognize a rare opportunity to revise silver’s unutilized potential.
According to specialists, silver is a highly undervalued asset with an artificially lowered market worth. An overwhelming quantity of every-day use objects contains a stance of silver as its building block. How come, then, its tremendous industrial demand does not translate into its price? It seems like it’s time for the value of silver to be reexamined.
But who are WallStreetBets?
Who are they and what exactly fuels their agenda? They’re a Reddit based collaborative of amateur investors, conceived by Jaime Rogozinski in 2012. A group initially meant to counterbalance the conventional Wall Street forums by offering non-elitist access to financial information, which by the end of January grew to over 3.5 million strong. A group, distinctive in their sympathetic approach to investing and providing a commune spirit for the individual traders, but far too overgrown to be consciously administered. Simultaneously, moldable enough to be prone to unregulated insidious engineering and subsequently — provoked into relentless crusades, just like the unstoppable GME Squeeze we’ve just witnessed.
Regardless of the traditional narrative propagated by the media, WallStreetBets are not necessarily single-handedly orchestrating the financial market coup. Their captivating payback was simply highlighting the issue that’s been well observed and well known by the financial analysts for years. Ultimately, the money market has collapsed under the weight of its own manipulation — WalllStreetBets merely happened to organize themselves at the right moment, tipping the domino that set off the chain of events.
WallStreetBets — The Movie
Even if the speculative rush is short-lived, it certainly shows the power of plenty that can be built when in the hands of organized, passionate amateurs. It shows that billionaire-owned hedge fund schemes can be perturbed when individuals recognize the scope of their potential.
Why did they step in? Certainly not just for profit, but in order to take a stand against an excess of capitalistic might. Provoking a power shift in the financial market, in a heartening fashion that could easily serve as material for a movie script.
What does the future hold?
It most likely belongs to the individual investor, whose eyes are finally open not only to the stock market manipulation but also to the amplitude of its own influence. As of today, the WallStreetBets group ballooned from 3.5 to 8.4 million within a week, with the awareness of small traders constantly growing. The sudden surge of interest sparks another question — where will their focus move next? Whether it will be silver, or… could it be gold this time?