{"id":32494,"date":"2020-11-28T06:00:14","date_gmt":"2020-11-28T04:00:14","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=32494"},"modified":"2025-08-28T08:57:14","modified_gmt":"2025-08-28T05:57:14","slug":"how-to-spot-manipulation-a-comparison-of-the-silver-and-crypto-bubbles","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/how-to-spot-manipulation-a-comparison-of-the-silver-and-crypto-bubbles\/","title":{"rendered":"How to Spot Manipulation: A Comparison of the Silver and Crypto Bubbles"},"content":{"rendered":"

From January to December 2017 the price of Bitcoin rose from $1,000 to <\/span>$20 000<\/span>. Experts forecast Bitcoin at $100,000, and investors took <\/span>loans<\/span><\/a> to buy Bitcoin and <\/span>exchanged<\/span><\/a> cars for ASIC miners. In 2018 Bitcoin’s price <\/span>fell<\/span> to $4,000. Some users <\/span>lost their savings<\/span><\/a>, some of them went into debt.<\/span><\/p>\n

A similar situation unfolded in the silver market in the 1970s. The asset’s price rose from $2 to $50, and then fell to $4. The metal’s prices were driven up by Haroldson Hunt’s sons \u2014 one of <\/span>the wealthiest Americans<\/span><\/a> according to The New York Times at the time. The subsequent market crash entered history as the \u201cSilver Thursday.\u201d<\/span><\/p>\n

Alongside the crypto exchange Currency.com<\/a> we compare the silver price surge in the 1970s with the 2017 crypto boom. We explain how to spot a market bubble and when to invest in new markets.<\/p>\n

Hunt Brothers: Billionaires With No Income<\/h2>\n

Haroldson Hunt \u2014 American oil magnate. In the 1940s he earned <\/span>$1 million<\/span><\/a> a week from <\/span>900 oil wells<\/span><\/a> in the United States and Libya.<\/span><\/p>\n

In the 1960s, Hunt imported Arab oil into the United States and profited from price differences. By 1969 the billionaire lost this income: Muammar Gaddafi seized power in Libya and nationalised the oil industry.<\/span><\/p>\n

Three years later the Hunt empire began to crumble: Haroldson developed <\/span>dementia<\/span><\/a>, and the United States faced an oil crisis. In 1973 the OAPEC countries stopped supplying oil to the United States. America reduced consumption of oil products, and Hunt lost part of his income. <\/span><\/p>\n

A year later OAPEC lifted the embargo and restored supplies. American companies began buying Arab oil: its unit cost was a third of American oil.<\/span><\/p>\n

Haroldson’s sons were left without a source of income. Herbert and Nelson Hunt assessed the state of the U.S. oil industry and decided to make money from another commodity. <\/span><\/p>\n

The Hunts chose silver. In the 20th century it was used by jewelers and the film stock manufacturers. Companies like Kodak consumed several tonnes of this precious metal each year.<\/span><\/p>\n

The oil crisis of the 1960s-1970s coincided with the heyday of the American film industry. The number of films produced annually rose by about 7% on average. Hollywood needed film stock, and its producers \u2014 silver.<\/p>\n

The Hunts Buy Silver. Asset price \u2014 $2.9<\/h2>\n

The Hunts’ plan was simple: to monopolise the silver market and sell it at a premium. In 1973 they bought 40 million ounces (1,244 tonnes) of silver for $116 million. The average asset price was $2.9 per ounce.<\/span><\/p>\n

By February 1974 the price of silver rose to $6.4 per ounce. By December of the same year the Hunts owned 55 million ounces (1,770 tonnes) of the precious metal \u2014 8% of the world’s supply at that time.<\/span><\/p>\n

\\\"How<\/p>\n

Purchasing 40 million ounces of silver triggered a 100% rise in the asset price (price chart SILVER\/USD<\/a> on Currency.com).<\/p>\n<\/div>\n

For five years the Hunts created a silver shortage: they bought up futures, demanded deliveries against them and moved the metal to Switzerland. By 1979 they had effectively monopolised the market.<\/p>\n

The silver shortage led to a surge in prices. In two months \u2014 from August to October 1979 \u2014 consumers and speculators pushed the asset price from $8 to $16 per ounce.<\/p>\n

\\\"How<\/p>\n

Consumers battled the Hunts and pushed the price higher (price chart SILVER\/USD<\/a> on Currency.com).<\/p>\n<\/div>\n

The plan worked: suppliers expected further price gains and cancelled selling offers on exchanges. This exacerbated the shortage, and in 1980 the price of silver rose to $50 per ounce.<\/p>\n

The Hunts Own a Third of the World\u2019s Silver Stock. Asset price \u2014 $50<\/h2>\n

By 1980 the Hunts owned about a third of the world\u2019s silver reserves in bars. They also held 69% of the April-delivery futures.<\/span><\/p>\n

The Hunts hoped for further price gains. They did not sell the bars and continued to buy futures contracts.<\/span><\/p>\n

In early 1980 the brothers\u2019 paper profits stood at $3.5 billion. Their futures positions were worth $7 billion, with $6 billion borrowed from brokers.<\/span><\/p>\n

\\\"How<\/p>\n

In February 1980 silver was trading at $50 per ounce (price chart SILVER\/USD<\/a> on Currency.com).<\/p>\n<\/div>\n

Actions by the Hunts affected jewelers and silver miners. The former lost customers as jewellery prices rose, while the latter hedged risks and incurred losses.<\/p>\n

Consumers and silver producers grew wary of a market takeover. They filed complaints with the financial regulator CFTC and commodity exchange leadership, and publicized the situation in newspapers. For example, in 1980 the jeweller Tiffany published in The New York Times an article<\/a> accusing the Hunts of greed.<\/p>\n

The Hunts Sell Silver. Asset price \u2014 $5<\/h2>\n

In early 1980 jewellery-industry representatives approached the leadership of the US COMEX exchange. They asked the exchange to curb the Hunts\u2019 silver accumulation.<\/span><\/p>\n

COMEX staff found no grounds to freeze the market: the Hunts acted within the law. The exchange then proposed that the brothers sell April futures at $50 and, instead, buy July contracts at $25 or silver coins at $35 per ounce. The Hunts refused.<\/span><\/p>\n

The decision sparked accusations of market manipulation. COMEX announced a trading freeze on futures and banned new positions. The Hunts could not buy futures or sustain the silver price. Meanwhile traders were closing long positions on the April futures.<\/span><\/p>\n

By March 1980 the price of silver had fallen to $30 per ounce. Thereafter brokers demanded a margin of $135 million from the Hunts.<\/span><\/p>\n

\\\"How<\/p>\n

Liquidation of the Hunts\u2019 positions in a day knocked silver price down by 40% (price chart SILVER\/USD<\/a> on Currency.com).<\/p>\n<\/div>\n

On 27 March 1980 the Hunts liquidated the remaining silver positions. The day became known as Silver Thursday: the metal\u2019s price fell by 50% to $10 per ounce.<\/p>\n

The Hunts\u2019 losses amounted to $9 billion. The brothers liquidated futures positions, sold silver in Switzerland and pledged the family business. Even after this they still owed about $1.5 billion.<\/p>\n

During Silver Thursday, market participants realised the Hunts would not defend the asset\u2019s price. After their positions were liquidated, the market\u2019s silver supply rose by about a third.<\/p>\n

For two years the metal\u2019s price drifted lower. By 1982 it had returned to roughly the 1975 level, around $5 per ounce.<\/p>\n

Silver-1979 and Bitcoin-2017: What They Have in Common<\/h2>\n

The market bubbles of 1979 and 2017 began with traders\u2019 faith that other investors would buy the asset above its current price. But the silver bubble and the Bitcoin boom share other features as well.<\/span><\/p>\n

The asset\u2019s price rose thanks to borrowed money.<\/strong> The Hunts pushed silver to $50 per ounce thanks to a $6 billion loan. The brothers planned to repay it after selling their positions for a profit.<\/p>\n

According to a study by Joe Griffin of the University of Texas at Austin, in 2017 an unknown manipulator bought Bitcoin after new issuances of USDT. After Bitcoin\u2019s price fell in 2018 the manipulator returned unsecured USDT to Tether for burning.<\/span><\/p>\n

The price rose due to manipulator activity.<\/strong> The Hunts sustained the silver price through a pre-existing deficit. According to Griffin, an unknown manipulator in 2017 bought Bitcoin on dips, accumulated a position and prevented the price from dropping below prior lows.<\/p>\n

The price rise sparked public panic.<\/strong> In 1979\u20131980 Americans sold silver bars melted from cutlery, coins and jewellery to speculators. Thieves carried silver from homes while leaving other items untouched.<\/p>\n

In 2017 the media covered Bitcoin and Ethereum growth. This drew newcomers to the crypto markets, who borrowed to trade on crypto exchanges, buy coins and mining devices.<\/p>\n

Silver-1979 and Bitcoin-2017: How They Differ<\/h2>\n

The silver and Bitcoin bubbles followed a similar path but differed in several respects. This reflects the absence of regulators in the crypto market in 2017.<\/p>\n

The silver bubble burst due to exchange intervention, while Bitcoin collapsed after demand from large investors waned.<\/strong> COMEX halted silver trading amid suspicions of market manipulation. The crypto market had no such regulator. The Bitcoin bubble burst when large investors closed their positions and the asset\u2019s price fell about 25%.<\/p>\n

Silver fell about 80% in two months, Bitcoin in a year.<\/strong> After COMEX\u2019s decision the Hunts could not defend silver\u2019s price. Other traders closed positions and drove the market down. New investors bought silver due to the trading freeze.<\/p>\n

Cryptocurrency exchanges continued to operate after Bitcoin\u2019s price drop. Newcomers bought Bitcoin, while traders took profits.<\/p>\n

According to Currency.com analyst Mikhail Karhalev, the possibility of a trading halt could be beneficial for cryptocurrencies:<\/p>\n

\n

\u201cIn March 2020, when Bitcoin fell to $4,000, some exchanges stopped trading due to technical glitches. That saved the market from a crash. On another occasion this may not happen, and only a regulated trading halt would help. Do not forget that institutional investors are entering the crypto markets. They will push for regulation to protect their funds,\u201d he notes.<\/p>\n<\/blockquote>\n

For now regulators\u2019 role in crypto markets is partly fulfilled by exchange glitches. Trading engines struggle to handle order volumes during market panics. In such moments traders cannot place new orders, and exchanges manage to execute liquidations.<\/p>\n

The Hype Cycle: From Market Bubble to Mass Adoption<\/h2>\n

The emergence of a market bubble is partly described by the hype cycle<\/a> \u2014 a pattern studied in 1995 by Gartner, the research firm. The hype cycle comprises five stages:<\/p>\n