The Bank for International Settlements exposes the silver flash crash of 36% in a single day: retail investors and leveraged ETFs are the "hidden hands" behind it.

According to data from the Bank for International Settlements, silver experienced the most severe sell-off in history at the end of January, with the increasing influence of retail investors in leveraged ETFs accelerating this process. Data shows that silver plummeted by 36% on January 30th, marking its largest single-day decline on record. Earlier in the year, amid geopolitical turmoil and concerns about the independence of the Federal Reserve, a wave of speculative buying pushed silver to historical highs. The Bank for International Settlements stated in its quarterly report on market developments that the sudden plunge of silver by over 50% in just a few weeks after soaring, indicates that retail capital flows have played a destabilizing role, exacerbated by forced selling of leveraged ETFs. Calculations show that as prices fell, the largest ETF tracking silver had to quickly sell futures worth over $3 billion, sparking a new wave of selling in an already crowded market. The ProShares Ultra Silver ETF (AGQ), as part of its daily leverage reset, must mechanically adjust its futures exposure to achieve a return equivalent to twice the daily increase in silver futures. The Bank for International Settlements stated: "This predictable, momentum-trading-like trading behavior forms a feedback loop that reinforces the current trend and may distort prices. In the frenzy of retail-driven precious metals markets, the destabilizing trading behavior of leveraged ETFs seems to have expanded." The report indicated that margin calls further intensified the selling. The combination of futures selling and ETF rebalancing formed a self-reinforcing cycle of price decline and additional margin calls. Data shows that leveraged ETFs have become increasingly popular in recent years, with nearly one-third of leveraged ETFs launched last year incorporating some form of leverage. According to sources, the U.S. Securities and Exchange Commission (SEC) recently requested issuers not to proceed with new fund plans, citing concerns about increasingly aggressive fund structures.