Silver squeeze next on the list for WallStreetBets, or is it?

It has been a busy week for WallStreetBets as the GameStop Corp (NYSE: GME) short squeeze took the world by storm. This event has been the talk of the town as the literal manifestation of the collective little guy versus the big guy hedge fund managers.

However, it appears that the party doesn’t stop at GameStop and other heavily shorted names – now the attention has turned to a silver squeeze. Yet, this time the community isn’t as one-minded about this particular squeeze.

The path to this moment

Last week’s GameStop mania led to Melvin Capital Management and Citron Research removing their short positions as the losses stacked up. Brokers have also found themselves under the public’s microscope due to the trading restrictions imposed on a basket of stocks experiencing high volatility.

Brokers cited liquidity being the major cause for restrictions, as the high volatility could have left the brokers in a position without funds to cover the interim, increasing the value at risk (VAR).

Once restrictions were put in place, the attention shifted to other non-restricted tradeable listings, such as Dogecoin. The cryptocurrency experienced a surge of 900% in the space of one day – at which point Robinhood proceeded to restrict the trading of Dogecoin as well, as reported by Business Insider.

The result of these stoppages in momentum has pushed some of the community onto its next target, silver.

Silver squeeze in two minds

The original hypothesis on WallStreetBets titled “THE BIGGEST SHORT SQUEEZE IN THE WORLD $SLV Silver $25 to $1,000” outlines a belief that silver is manipulated to cover inflation by shorting with paper contracts.

Users on the subreddit pegged the inflation-adjusted price at $1,000. Some in the community believe this will hit the likes of JP Morgan, which settled a lawsuit not too long ago over ‘spoofing’ of the precious metals market.

Alternatively, there are many others in the community who see the silver squeeze as a distraction from the real agenda, which has been targeting the hedge funds. Furthermore, many believe that JP Morgan and others, such as Citadel, are actually long on silver – which means an increase in the price of the commodity would benefit them.

The price of silver and ASX silver shares is increasing

Today, the silver price is on the increase – trading up roughly 7% to a spot price of A$28.60 (at the time of writing) with silver mining companies benefitting from the push. Some ASX silver shares trading upwards today include Adriatic Metals PLC (ASX: ADT) up 14.7% and Thomson Resources Ltd (ASX: TMZ) up 38.5% at the time of writing.

Many of the popular bullion dealers, including APMEX, are currently reporting unprecedented demand for physical silver as well.

The outcome of the latest short squeeze attempt will likely develop over the coming days. But at the moment it seems that the WallStreetBets community isn’t fully aligned on this one, as they were for GameStop.

More reading

• The worst mistake GameStop investors can make right now
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• How to buy US shares from Australia right now
• GameStop chaos: Real reason Robinhood cut off retail investors
• GameStop frenzy: 3 shorted ASX shares that could shoot up

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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