To The Moon

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Welcome to Muthu Boy Prata Shop ☕🫓 I’m breaking down my silver analysis the simple way—big global picture first, then the China/SHFE drama, COMEX delivery pressure in March, why CME margin hikes can only do so much, defensive tool loosing steam and the real risks at the end.

Chinese billionaire Bian Ximing (via Zhongcai Futures) built a huge naked short position in silver on the Shanghai Futures Exchange (SHFE)—around 450 tonnes (30,000 contracts). 

This exceeded the exchange's entire registered inventory (350 tonnes at the time). Regulators froze his position yesterday, banned further shorting, and publicly disclosed the scale to curb escalation.

Chinese Billionaire's Massive SHFE Short Sparks Intervention.

SHFE inventories are draining fast—down sharply (e.g., recent drops of 26-27 tonnes in days, with reports of 195 tonnes lost in ~2 weeks from late Jan highs).

At current withdrawal rates (around 60,000+ kg/day in some estimates), remaining stocks (423 tonnes or less recently) could evaporate in days/weeks if unchecked. 

This highlights extreme physical tightness in China.

Accelerating Physical Drain Worldwide – February Already Extreme

February 2026 is on fire for deliveries: Nearly 98% of open interest stood for physical silver in just the first six days.  

Feb 2025 full month: ~24 million oz settled.  

Feb 2026 first 5-6 days: Already ~19 million oz (with immediate delivery contracts surging).

This signals buyers front-running shortages aggressively.

March 2026: The Big Stress Test on COMEX

March is the major delivery month—historically 3x+ prior years.  

Mar 2025: ~80 million oz delivered (3x March 2024).  

Mar 2026: Open interest remains massive (80,000-100,000+ contracts, notional 400-528 million oz). 

Registered (deliverable) inventory: Only ~100-113 million oz (some reports ~82-103M oz). Coverage ratio ~20-25%.

Scenarios: If just 25% of contracts stand for delivery → not enough silver.  

If 3x-4x trend continues → up to 240 million oz demanded → COMEX system breaks (forced cash settlements, premiums, or worse).

First notice day ~late February—we're under 3 weeks away. 

Physical drain is accelerating, with buyers securing metal now. Global Physical Tightness Snapshot China: SHFE ~11.5M oz left + SGE ~16M oz → <30M oz total remaining.  

LBMA: Thin transparency, but estimates ~150M oz free-float physical.

CME Margin Hikes: A Defensive Tool Losing Steam

CME switched to % of notional in mid-Jan 2026 and has hiked repeatedly (at least 3x since late Jan): 

Silver now at 18% (from 15%, prior ~9-11%). Official reason: Volatility/risk management. But timing screams delivery pressure mitigation: High OI vs. low inventory risks overwhelming supply if longs stand firm → potential failure/default. Hikes discourage leverage, trigger calls/liquidations, push rolls to later months (May/July), reducing near-term delivery risk.

Diminishing Effectiveness Thresholds

Hikes work best at lower levels (5-12%) by shaking speculators. Diminishing returns hit hard at 15-20%—the "sweet spot" for least effectiveness in squeezes: Retail/small players exit.  

Strong hands (institutions, physical buyers) stay with high cash buffers (50-100%+ collateral).  

Liquidity drops, volatility can spike short-term from cascades, but committed longs hold.

Above 20-25%: Counterproductive—market goes near-cash (e.g., 25% = ~$95k+ per contract at $76-78/oz), driving volume to physical/OTC, thinning depth, failing to deter fundamentals-driven players. 

Historical squeezes (1980 Hunt, 2011) show this.

Current Level (18%) Already "Less Effective" Zone

Recent hikes caused sharp corrections (10-15%+ drops, 30%+ pullbacks), but: March OI hasn't collapsed proportionally.  

Physical signals (elevated deliveries, tight stocks) show demand persists.  

Traders adapt: Lower contracts but more cash, rolls, or direct physical/OTC buys.

If CME hits 20%+, enters counterproductive territory—liquidations fade, volatility may rebound on squeeze fears, tool buys less time vs. March mismatch.

Bottom Line 

The paper silver price on screens is disconnected from physical reality. Every metric—China bleed, COMEX imbalance, accelerating deliveries, margin limits—points to structural risk. If prices stay suppressed, the paper pricing system faces a potential break in the next 2-3 weeks, possibly historic (beyond January chaos).What do you think?

 Stacking more physical yet?

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