Silver Thursday & the Hunt Brothers: History Repeating?

Silver Thursday: Echoes in Bitcoin's Rise?

1980. March 27th. Silver Thursday.

The Hunt brothers thought silver would act as a great inflation hedge like gold. So, they cornered the market – buying up large amounts of silver contracts on leverage to drive up the price between 1973 and 1979.  At their peak it’s thought they owned one-third of the entire world supply of silver that was not held by governments or central banks. Prices kept going up throughout 1979. In response to the accumulation strategy, COMEX adopted Silver Rule 7 in January 1980, tightening leverage restrictions on trading in the commodity markets. Prices began to fall, and the Hunt brothers had to front up margin calls.

March 26th, 1980 – a day before the crash - jeweller Tiffany's takes out an ad in The New York Times: “We think it is unconscionable for anyone to hoard several billion, yes billion, dollars' worth of silver and thus drive the price up so high that others must pay artificially high prices for articles made of silver".

March 27th: the Hunt brothers miss a margin call of $100 million to the Bache brokerage firm. The market plunges. You could call it a short squeeze – the problem with leverage when the market turns against you. But it’s also true to say that the Hunt had become the silver market – there just weren’t any buyers at those prices except for themselves.

In totally unrelated news, MicroStrategy said Thursday it had completed a $3bn offering of 0% convertible notes to fund more Bitcoin purchases. On Monday, the company said it had bought around 51,780 Bitcoin in the last week for about $4.6bn in cash. The company owns approximately 279,420 bitcoins, which were acquired at an aggregate purchase price of approximately $11.9 billion and an average purchase price of approximately $42,692 per bitcoin.

I mean, I don’t know. But it kind of smells a bit Hunt-like...doesn’t it? Of nearly 20mn mined Bitcoin (out of a total of 21mn that will ever be mined), MSTR owns 1.4%. Now, that is not anything like as much as the Hunt’s control of the silver market. But the question is always, ‘Who is the next marginal buyer’?

CEO Saylor has been here before. He once famously lost $6bn in a day. This time, the play is something like this: bitcoin goes up, so MSTR goes up since it owns a lot of Bitcoin and because, well, it’s a meme. It’s a leveraged play on Bitcoin but also just a meme. Saylor then sells more MSTR shares to buy more Bitcoin. This pushes up the price of bitcoin, and the price of MSTR stock. And round and round it goes. There is a whole community on X that calls itself Irresponsibly Long $MSTR.

Following its thumping rally (500% YTD) MSTR fell 16% yesterday after Citron Research put out a short sell note. “Much respect to @saylor, but even he must know $MSTR is overheated,” Citron tweeted. Meanwhile, Bitcoin approaches the magic $100k mark.

European equities fell on economic worries, but London is higher. Chinese equities took a bit of a tumble overnight with soft tech earnings combined with worries about Trump’s return and tariffs. Soft PMI data from Europe keeps a 50bps cut for the ECB in December on the table. The dollar is stronger, with the euro breaking down at 1.04 and DXY at 107, which is its strongest in two years. Gold rose for a fifth day and is back to almost $2,700.

On the euro – traders now see 150bps of cuts next year and evens whether they cut by 50bps next month. There is no way that the ECB can escape this now – the PMIs are horrible and Trump is about to slap tariffs on. We’ve also got more Ukraine worries and higher natural gas prices…there is nothing but pain for Europe and the euro ahead. At least it’s pretty obvious what they need to do: the activity indicators are leading and falling, and the price indicators are sticky but lagging.

Sterling was also down against the broadly firmer dollar with cable to 1.25, its lowest since May with UK retail sales down more than forecast in October ahead of the Budget. Vibes matter, I suppose.

Have a great weekend

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.