Hedgefund and big Investment banks are well known for all sorts of market manipulation throughout history. In my previous blog, I outlined the fact that JP Morgan manipulated the silver market, and now I’m going to explain how they do it through iTrust Silver Shares (SLV) in more detail. Please note that all credit for this thesis goes to u/TheHappyHawaiian from Reddit. I merely summarize his idea in a more simplified way.
During the GME saga, Redditors bought a lot of $GME shares, which caused the price to rise and forced Melvin Capital to cover their naked short, thus creating a GME short squeeze. At some point, they discovered that silver was the most shorted commodity in the world and currently still is. SLV started gaining popularity as retail money flowed into the ETF in the hope of short squeezing the silver. The operation silver squeeze by Redditors failed miserably as the custodian of the SLV is none other than JP Morgan.
SLV is a silver ETF backed by physical silver held by a third party (JP Morgan). SLV does not hold other assets such as silver derivatives, and they are required by law to have physical silver when someone buys SLV. This means that SLV shouldn’t be possible to manipulate silver price as their only role is to buy silver when there’s an inflow and sell silver when there’s an outflow. SLV takes no risk against silver price volatility as SLV holders will bear all that risk. This is where JP Morgan comes in, pulling the string behind the scene to manipulate the silver price.
Remember that I said SLV could not short silver? But JP Morgan can short silver on the futures market. The futures market heavily influences the price discovery of silver. When JP Morgan shorts silver, it dumps the price on the futures market, and the spot price of silver will soon follow.
SLV-JP Morgan Silver Manipulation
- JP Morgan has a large reserve of silver.
- Silver price rises which catch the attention of retail investors.
- Retail investors buy SLV.
- JP Morgan “sells” silver to SLV.
- JP Morgan shorts silver on the futures market to push down the silver price.
- Retail investors feel discouraged and sell SLV as the price of silver drops.
- JP Morgan “buys” silver back from SLV
- JP Morgan closes short; silver price rises again.
- Repeat
Note that JP Morgan “buys” and “sells” silver with SLV only on paper as JP Morgan is the custodian. JP Morgan is able to “sell” at a higher price and “buy” back silver at a lower price every time they repeat the manipulation.
Suppose you wonder why retail investors will buy SLV in the first place. That’s because SLV is the largest silver ETF, with 600 million ounces of silver under its control. The game was rigged from the start; buy physical silver!