The Silver Squeeze (#silversqueeze) is heating up again, with prices now closing in on $40 (approximately 6,000 yen)/per ounce. However, since many people are unaware of what the Silver Squeeze is let alone how to profit from it, I continue to seek new and better ways to explain it so everyone can profit together.
Financial expert Michael Maloney has significantly simplified the concept in a video he posted back in March.
I have also translated this video into Japanese with the help of AI.
In the video, Maloney explains that a short squeeze occurs when entities & individuals borrow silver ETFs with the expectation that the price of silver will drop. They sell the shares they borrow, planning to buy back the shares at a lower price before returning them, so they can profit from the difference. This practice suppresses the true price of silver because they are trading silver contracts for which no physical silver exists. Currently, the COMEX allows approximately 400 paper contracts for every one ounce of physical silver they hold. Furthermore, each of those 400 contracts can also be leveraged up to 100 times–meaning the true value of silver is somewhere between 400x-4000x the current price. However, many individuals &, more importantly, entire nations within the BRICS bloc, have identified this scam & are calling the bluff. They are buying up all of the physical silver supply. Since there is not enough physical silver to back the ETF contracts, this action breaks the scam of the entities leveraging the criminally lax policies of the COMEX. It paves the way for true price discovery. The price of silver has been suppressed since the Coinage Act of 1873. Therefore, when true price discovery occurs, silver may jump in price anywhere between $1,200 per ounce to $12 million per ounce. Even by the lowest estimates, these are astronomical numbers, considering the current price is still under $40. With profit potential this massive, it can only be compared to buying Bitcoin when it was first released.
Step-by-Step Guide to Short Selling
Short selling is a trading strategy where an investor sells a security they do not own, with the expectation that its price will decline, allowing them to buy it back at a lower price to return to the lender and pocket the difference. Here’s how it works:
- Identify a Security to Short:
- The investor identifies a security (e.g., a stock or, in this case, silver ETFs) that they believe will decrease in value. This could be based on fundamental analysis, technical indicators, or market sentiment.
- Borrow the Security:
- The investor borrows the security from a broker or another investor who owns it. This borrowing is typically facilitated through a margin account, which allows the investor to borrow securities against the value of other assets in their account.
- The broker will charge a fee or interest for lending the security, and the investor must maintain a certain level of margin (collateral) in their account.
- Sell the Borrowed Security:
- The investor immediately sells the borrowed security on the open market at the current market price. This sale generates cash, which is held by the broker as collateral.
- Wait for the Price to Drop:
- The investor waits for the price of the security to decline, as anticipated. During this period, they monitor the market and may use stop-loss orders or other risk management tools to limit potential losses if the price moves against them.
- Buy Back the Security (Cover the Short):
- Once the price has dropped to a level the investor finds favorable, they buy back the same amount of the security they sold. This is known as “covering” the short position.
- The investor returns the borrowed securities to the lender, and the difference between the sale price and the buyback price (minus borrowing fees and interest) is their profit.
- Return the Security:
- The investor returns the exact number of shares (or units of the security) to the broker or lender, closing out the short position.
Example:
- Suppose an investor shorts 100 shares of a silver ETF at $40 per share, receiving $4,000.
- If the price drops to $30 per share, they buy back 100 shares for $3,000.
- They return the 100 shares to the lender and keep the $1,000 difference as profit (minus any fees).
Risks of Short Selling:
- Unlimited Losses: Unlike buying a security (where the maximum loss is the initial investment), short selling has theoretically unlimited loss potential because there is no cap on how high the price can rise.
- Margin Calls: If the price of the security rises significantly, the investor may face a margin call, requiring them to deposit additional funds or close the position at a loss.
- Short Squeeze Risk: If the price rises sharply, the investor may be forced to buy back the security at a higher price, leading to substantial losses.
Step-by-Step Guide to a Short Squeeze
A short squeeze occurs when the price of a heavily shorted security rises sharply, forcing short sellers to buy back the security to cover their positions, which in turn drives the price even higher. Here’s how it unfolds:
- Heavy Short Interest:
- A security (e.g., silver ETFs) has a high number of shares sold short, meaning many investors are betting on a price decline. This creates a large short interest ratio, indicating that a significant portion of the float (shares available for trading) is shorted.
- Price Begins to Rise:
- For various reasons (e.g., increased demand, positive news, or coordinated buying by long investors), the price of the security starts to rise. This could be due to fundamental factors, market manipulation, or a combination of both.
- Short Sellers Face Losses:
- As the price rises, short sellers begin to incur losses because they must buy back the security at a higher price than they sold it for. This creates pressure on them to cover their positions to limit further losses.
- Covering Positions Drives Price Higher:
- To cover their short positions, short sellers must buy back the security on the open market. This buying activity increases demand, which further drives up the price. This creates a feedback loop where the rising price forces more short sellers to cover, exacerbating the price increase.
- Panic Buying and Exponential Price Increase:
- As more short sellers rush to cover their positions, the demand spike can lead to an exponential increase in the price. This is the essence of a short squeeze, where the price can rise dramatically in a short period.
- Long Investors Profit:
- Investors who anticipated the short squeeze (often called “long squeezers”) benefit from the price increase. They may have bought the security at a lower price and are now selling at a much higher price, realizing significant profits.
Example:
- Suppose 50% of a silver ETF’s float is shorted, and the price is $40 per share.
- A group of investors (e.g., BRICS nations or retail investors) starts buying physical silver en masse, pushing the price to $45.
- Short sellers, facing losses, begin to cover by buying back shares, which pushes the price to $50.
- The increased demand from covering short positions continues to drive the price higher, potentially reaching $60 or more, causing severe losses for short sellers and massive gains for long investors.
How a Short Squeeze Breaks Short Selling (i.e. The Goal of the #Silversqueeze Movement)
- Forced Buy-Back to Exit with a Massive Short Position and Severe Supply Shortage:
- Short sellers must return the borrowed securities to the lender by buying back the exact number of contracts they sold short. In the case of silver, the total short position is a staggering 882 million ounces, as reported in the COT (Commitments of Traders) data from July 8, 2025. However, the critical issue is the extreme imbalance between paper contracts and physical supply: the COMEX currently allows approximately 400 paper contracts for every one ounce of physical silver, meaning there is only enough silver inventory to fulfill 1 in 400 contracts, possibly only 1 in 4000 contracts.
- To exit their positions, short sellers must purchase these 882 million ounces on the open market. With only a fraction of this amount (approximately 2.205 million ounces of physical silver available if we assume 882 million ÷ 400 = 2.205 million ounces of backing), the demand triggered by a short squeeze far exceeds the available supply. At the current price of approximately $40 per ounce, the theoretical cost to buy back 882 million ounces is $35.28 billion. If the squeeze drives the price to $60 per ounce due to the supply shortage, the cost would rise to $52.92 billion, resulting in potential losses of $17.64 billion for short sellers who sold at the lower price. This lack of physical silver to meet the demand makes the buy-back process catastrophic, breaking the short selling strategy.
- Loss of Control Over Exit Timing and Price Due to Supply Constraints:
- Normally, short sellers can choose when to buy back the securities based on their market analysis. However, with only 1 in 400 contracts backed by physical silver, a short squeeze triggers a rapid price increase as demand outstrips the minuscule 2.205 million ounces of available inventory. This forces short sellers to act quickly to limit losses, stripping them of control over the timing and price of the buy-back.
- Margin calls become inevitable as the value of the shorted contracts soars, compelling short sellers to buy back at exorbitant prices in a market where physical silver is virtually unobtainable.
- Increased Demand from Covering Positions Exacerbated by Supply Shortage:
- As short sellers rush to buy back the 882 million ounces to exit their positions, their buying activity collides with a market where only about 2.205 million ounces of physical silver can theoretically back the contracts. This demand surge, far exceeding the available supply, drives the price exponentially higher, creating a feedback loop that intensifies the squeeze. The more short sellers attempt to cover, the more they contribute to the price increase, making it nearly impossible to exit without massive losses.
- Exponential Losses Due to Price Escalation and Supply Scarcity:
- The necessity to buy back at higher prices, compounded by the lack of physical silver, results in exponential losses. For example, if a short seller sold contracts representing 100,000 ounces at $40 per ounce and the price rises to $60 due to the squeeze and supply shortage, they must buy back those 100,000 ounces at $60 each, incurring a $2 million loss. Scaled to the 882 million ounces, with only 2.205 million ounces available, the losses could escalate to billions as prices could theoretically soar to hundreds or thousands of dollars per ounce in a full squeeze scenario.
- Market Manipulation and Coordinated Buying Amplify the Supply Crisis:
- Coordinated buying by long investors, such as nations within the BRICS block demanding physical delivery, intensifies the squeeze by further depleting the already scant 2.205 million ounces of physical silver. This makes it nearly impossible for short sellers to source the 882 million ounces needed to exit, exposing the scam of leveraging 400:1 paper contracts and forcing buy-backs in a market with no adequate supply.
- True Price Discovery and Long-Term Impact Driven by Supply Reality:
- The short squeeze leads to true price discovery, where the market price reflects the actual supply (a mere 2.205 million ounces against 882 million ounces of short interest) and demand dynamics, rather than being suppressed by short selling activities. For short sellers, this means their strategy of betting on a price decline is obliterated, as the market corrects to a valuation reflecting the severe supply shortage.
- The long-term impact is a potential deterrent for short sellers in markets with such a dramatic imbalance, especially as the physical silver shortage becomes undeniable.
Comparison and Connection
- Short Selling vs. Short Squeeze: Short selling is a strategy to profit from a price decline, while a short squeeze is a market phenomenon that occurs when the price rises sharply, undermining the short selling strategy. The short squeeze breaks short selling by forcing short sellers to act against their original plan, often at great financial cost.
- Silver Specifics: In the context of silver, the short squeeze is particularly impactful because of the high ratio of paper contracts to physical silver (400:1 on the COMEX). When investors demand physical delivery, it exposes the lack of physical silver, triggering a squeeze that can lead to exponential price increases.
- Historical Context: The suppression of silver prices since the Coinage Act of 1873 sets the stage for a potential massive price jump during a squeeze, similar to early Bitcoin adoption, where early investors saw exponential returns due to underestimated value and growing demand.
TLDR
In poker terms, short sellers are bluffing & silver investors are calling the short sellers’ bluff.
When the short sellers lose, silver will be repriced between 400-4000 times the current price.
I’m not a financial advisor & this is not financial advice, I’m just heavily invested in silver.
If you want to start investing in precious metals & want a FREE half-ounce of silver, sign up for Kinesis using my link!