Silver Paper's Problem
•February 15, 2026
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Why It Matters
Understanding silver's liquidity breakdown reveals systemic risks in commodity derivatives that can trigger extreme price volatility, affecting investors and hedgers alike. The episode is timely as recent price spikes have exposed how thin markets can destabilize broader financial ecosystems, prompting a re‑evaluation of risk management practices.
Silver paper's problem
This is illustrated in silver’s chart, with open interest on Comex falling to the lowest level for some time. Speculators are being deterred by wide spreads and high volatility. Furthermore, banks and other traders can only hold less physical and paper silver because of its higher value, further impacting contract liquidity.
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There is no silver
Other than raiding ETFs and leasing it at whatever the rate, there’s no liquidity in physical silver. And since derivatives are encashable at maturity for silver, it also means there’s no liquidity in silver paper either. These are the simple facts behind a price which exploded from under $50 to $120 virtually in a straight line in only two months. And it was the lack of liquidity which led to exceptional volatility, seeing silver virtually halving from $120 in only six trading sessions.
This is not an orderly market. It is a market failure, inevitable because of “the system”.
The Western derivative system cannot manage its own failure. In silver’s case, its
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