Market returns are not normally distributed
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Margin increases will do that
Literal trillions were liquidated in precious metals in a matter of hours.
Is there another example where something like this happened ?
It only retraced like 2 weeks of gain, is that exceptional (the run-up was also unprecedented right?)
Everyone (esp retail) got FOMO (there was a lot of talk in the media in the past few weeks/months, like it is the new crypto play) and piled into it (incl leveraged product). And I think a lot of people learned their lesson and won’t bet against the meme-investors plays.
But at some point, amount of capital going in stops and some profit taking can trigger a sharp stop (exacerbated by the leverage).
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I totally get the phenomenon. Still, is there another example of trillions of a single asset being wiped out over a couple of hours?
How many trillions are wiped when USD goes down 1%?
Multiple sigma events happen all the time. Long term JP government bonds last week, silver now, etc etc too many to count. Again, there is no normal distribution.
Btw it’s probably debatable whether we’re talking about trillions. Trying to figure out, but investable silver holdings isn’t that large (the sources I’m finding online says 4B ounces, so market cap would be below 1 trillion).
(silver in industrial products or jewelry isn’t really tradable for example, it was “consumed” already)
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By the way, another reason why this has nothing to do with engineered market moves.
Know the market microstructure.
Take the AGQ ETF. 2x silver long. Prospectus:
Page 7 gives you the timing on when hedging needs to be done by the market makers, ETF managers.
1.25 pm Eastern. Since it is a rather large ETF and the move was large, their hedging requirements were huge.
Guess when Silver bottomed intraday? Yes, 1.25pm. 7.25 out time.
So… no engineering, just the result of leverage, stops, hedging, more stops etc.
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Interesting. Thanks.