Silver Squeeze Armageddon: Why some Banks and Exchanges Could Face Wipeout in 2026

In the volatile world of commodities, silver has always been the wild card, often overshadowed by gold but packing a punch in industrial applications from solar panels to electric vehicles. As we head into 2026, whispers of a looming supply crisis are turning into roars. Prolonged mining deficits, skyrocketing demand from green tech, and aggressive physical hoarding in Asia could push silver supplies to the brink. What happens next? A potential price explosion that rivals the infamous 1980 Hunt Brothers saga, but on steroids. Prices have already shattered records, flirting with $50-$59 per ounce in late 2025 amid tightening shortages. For silver traders, this isn’t just market chatter; It’s a high-stakes battlefield where fortunes could be made or obliterated. Let’s dive into the worst-case scenarios for the key players: short-sellers, banks, and futures exchanges. Buckle up, this could be the trade of the decade.

The Short-Sellers’ Doomsday: Billions Vanished in a Blink

Short sellers thrive on betting against rising prices, borrowing silver contracts to sell high and buy back low. But in a critical supply drought, where industrial demand devours every ounce, the physical metal vanishes from vaults, and the tables turn violently. Prices could skyrocket to $90, $100, or even jaw-dropping  $250 per ounce in the most extreme forecasts. If you have been following my articles from the beginning of this year, you already know that I have a $95 price target on Silver based on the 45-year Cup & Handle pattern that has recently broken out over the brim of the cup. I don’t see this as a gentle uptick: A single $1 per ounce jump could hammer net short positions for hundreds of millions in losses, like $275 million per dollar loss for a 55,000-contract short position. As prices double or triple in days, margin calls cascade like dominoes, automating liquidations at peak valuations and fueling an even bigger squeeze. What about hedge funds and speculators? Many could face outright bankruptcy, their portfolios evaporating in a “death spiral” of escalating costs. And if positions go “naked”, unhedged by actual metal, the wipeout is total, with traders recalling horror stories of being “wiped out in hours”.  For savvy long traders, this is a prime opportunity: Position early, ride the wave, and watch shorts scramble. But for those on the wrong side? It’s game over.

Banks on the Brink: From Powerhouses to Powder Kegs

Bullion banks, the heavyweights like those in the LBMA or COMEX, aren’t just facilitators: they’re knee-deep in the game, holding massive short positions to hedge trades, manage client flows, or even influence prices through derivatives. A supply Armageddon exposes their underbelly, turning balance sheets into battlegrounds. With lease rates spiking and vaults running dry, banks could rack up trillions in derivatives losses if they can’t deliver physical silver. Defaults loom large, eroding tier-one capital and threatening solvency. The spillover? A systematic meltdown, where silver woes bleed into broader markets forcing fire sales of other assets and igniting contagion. Worse still, as custodians for ETFs like SLV, banks face redemption runs and lawsuits if backing metal evaporates; think 57 million unbacked shares sparking chaos. Settlement delays stretch into weeks, freezing operations and shattering trust. In the nightmare scenario, “too big to fail” institutions crumble, begging for bailouts that might not even work if shortages persist. Traders take note: This fragility could hand longs the leverage to demand physical delivery, accelerating the squeeze and padding profits.

Futures Exchanges in Freefall: From Gatekeepers to Ghost

Exchanges like COMEX and LBMA are the arenas where paper silver battles rage, but they depend on physical delivery to maintain legitimacy. When supplies hit rock bottom, that foundation crumbles. Enter extreme backwardation: Spot prices soar above futures, signaling dire illiquidity, with hundreds of tonnes in pending deliveries going unfulfilled. Cash settlements replace metal handovers, breeding distrust. To stem the bleed, exchanges might slap on position limits, halt trading, or even shutter operations entirely, echoing the 2022 nickel fiasco with retroactive cancellations. The endgame? Silver trading flees to Eastern hubs like Shanghai, dethroning Western exchanges and rendering them irrelevant. In the absolute worst case, silver becomes “unobtainium”, priceless and unavailable, pushing deals to black markets and triggering regulatory Armageddon. For traders, this chaos spells volatility goldmine: Adapt fast, or get left in the dust.

The Silver Horizon: Opportunity Amid the Wreckage

With five-plus years of deficits, emptying vaults, and record shorts piling up, this supply crunch isn’t hype, it’s happening. Absent miracles like massive new mines or demand slumps, silver could ignite a broader financial rethink, repricing metals and beyond. For silver traders, the message is clear: Short beware, longs prepare. The squeeze could redefine winners and losers…the big question is:  Will you be ready to strike?

-Get TWO FREE WEEKS of AJ’s ‘s content, including DIRECTIONAL OPTIONS, OPTIONS SPREAD TRADING, and EQUITY ANALYSIS-completely free, here. 

-Get TWO FREE WEEKS of our CryptX cryptocurrency community here.