Silver Crashed 14% in a Day, Wiping Out $550 Billion – Here's Why

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Silver prices suffered a violent correction late Sunday, plunging roughly 14% in a matter of minutes during overnight trading before stabilizing.

The sudden drop erased weeks of gains and briefly sent silver tumbling from the low $80s to near the low $70s, shocking traders and triggering a wave of speculation across markets. The market cap of silver dropped by $550 billion in a single day.

Key Takeaways

• Silver plunged roughly 14% in minutes during thin overnight trading.
• The move was driven by forced institutional liquidation, not retail selling.
• A $34 billion Fed repo injection underscored broader liquidity stress.

At the time of writing, silver is hovering around the $72-$73 range, well off the session lows but still sharply lower on the day. The speed, timing, and structure of the move suggest this was not a normal selloff – and almost certainly not retail-driven.

Why the timing mattered

The collapse began shortly after 2:00 a.m. Eastern time on Monday, a period known for extremely thin liquidity in global precious metals markets. During these hours, the order book is shallow, meaning large orders can move prices far more aggressively than during peak trading sessions.

That timing alone challenges the popular narrative that retail traders were responsible. Retail participation rarely concentrates enough volume to move futures markets by double digits in minutes, especially overnight. Instead, the price action pointed to urgency – not discretion.

It was pointed that a forced liquidation of a large institutional position could be the likely trigger. According to online chatter, a leveraged entity tied to precious-metals derivatives appears to have breached margin requirements, prompting its prime broker or clearing firm to liquidate positions automatically. Once that process began, silver was sold aggressively at market, overwhelming overnight liquidity and triggering the cascade lower.

A mechanical selloff, not sentiment

Silver did not behave like a market reacting to news, data, or shifting sentiment. Prices did not pause at technical levels, nor did they show signs of gradual distribution. Instead, bids were swept rapidly, with futures cascading lower almost vertically.

This pattern is consistent with forced liquidation. When a large institutional player breaches margin requirements, positions are no longer managed by traders. Control shifts to automated risk systems whose sole mandate is to restore solvency as fast as possible.

In that scenario, there is no concern for execution quality, technical indicators, or market impact. The system sells at market until collateral requirements are met. In thin conditions, that process can overwhelm available liquidity in seconds.

Stress spreads beyond silver

The silver crash coincided with renewed signs of stress in funding markets. Overnight, the Federal Reserve injected $34 billion into the banking system via its emergency overnight repo facility, on top of roughly $17 billion added just two days earlier.

While the liquidity injection was not officially linked to silver, the timing raised concerns about counterparty risk. When a large participant is forced out of leveraged positions, clearing houses must ensure settlement continues smoothly. If a participant cannot meet obligations, the burden shifts up the chain, forcing rapid liquidity provisioning.

This dynamic often triggers what traders describe as a “correlation spike,” where selling spreads beyond the original asset. In these moments, markets are not repricing fundamentals – they are raising cash.

Derivatives made the drop worse

Options positioning likely amplified the move. As silver prices collapsed, dealers hedging short option exposure were forced to sell futures into a falling market. That mechanical hedging pressure can turn a sharp drop into a feedback loop, where lower prices force more selling, which then pushes prices even lower.

This is why the decline accelerated so quickly. It was not a reflection of new information, but of market structure working against itself under stress.

What changed – and what didn’t

Despite the dramatic price action, there was no new macro data, policy shift, or supply-demand shock tied to silver. The metal’s fundamental backdrop did not change overnight. What changed was positioning.

Forced liquidations tend to cleanse leverage from the system. Weak or overextended players are flushed out, ownership shifts, and markets eventually regain balance. While volatility can persist in the short term, the structural pressure that caused the crash does not usually last once liquidation flows are exhausted.

What to watch next

The key test now is how silver behaves during normal, liquid trading hours. Stability, tighter spreads, and controlled price action would reinforce the view that Sunday’s move was a one-off liquidity event. Renewed heavy selling during peak sessions, by contrast, would suggest deeper systemic stress.

For now, the evidence points to a classic liquidity cascade – fast, mechanical, and largely disconnected from fundamentals – rather than a broad loss of confidence in silver itself.