Silver plunges 36% in Warsh nomination as precious metals crash
Crypto journalist
Anas Hasan
Crypto journalist
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Precious metals suffered a heavy rout on Jan. 30, with gold plunging more than 12 percent below $5,000 an ounce, while silver posted its biggest one-day decline in history, plunging as much as 36 percent, according to Bloomberg.
The sell-off was sparked by President Donald Trump's appointment of Kevin Warsh as Federal Reserve chairman, which sent the dollar stronger and led to sharp gains in commodity markets.
The crash wiped out more than $15 trillion from the gold and silver markets in 24 hours, roughly half the size of the entire US economy.
Despite the brutal correction, both metals still ended January (gold up 12% and silver up 16%), with Bitcoin falling to a nine-month low of $82,000, raising questions about whether the digital asset will follow the path of precious metals or forge its own path.
A historical cellophane guided by Warsh's appointment and technical reasons
Spot gold fell more than 12 percent a point, hitting a low of 4,682 an ounce in its biggest one-day decline since the early 1980s, and closed up 9.25 percent at $4,880.
Silver experienced an even more dramatic decline, falling 36% on the day to $74.28, before settling 26.42% lower at $85.259, its worst day since March 1980.
Akash Doshi, head of global gold and metals strategy at State Street Investment Management, told Bloomberg: “The announcement of Trump's nomination to be the next Fed chair is positive for the US dollar and negative for precious metals.”
“This may have been exacerbated by the month-end rebalancing as both short the dollar and long precious metals have been on consensus macro trades over the past two to three weeks.”
Selling accelerated as forced selling and margin calls were not affected by leveraged positions.
Matt Maley, equity strategist at Miller Tabak, added: “It's getting crazy,” adding, “Much of this could be ‘forced selling'. It's been a very hot asset for day traders and other short-term traders lately. So, there's some leverage built into silver. With today's sharp decline, margin calls are out.”
Bloomberg noted that technical factors exacerbated the decline, forcing traders to sell futures contracts due to gamma compression.
Gold's relative-strength index recently hit 90, its highest in decades, indicating the precious metal is overbought and in for a correction.
Major mining companies suffered heavy losses, with Newmont down 11.52 percent, Barrick Gold down 12.09 percent, and AngloGold down 13.28 percent.
Copper retreated 3.4% from Thursday's record above $14,000 a tonne, while silver ETFs saw their worst day on record, with the iShares Silver Trust losing 31%.
Bitcoin faces a ‘two-way' dilemma as markets assess Fed policy.
Bitcoin fell to $82,000 following Warsh's appointment, accelerating Bitcoin ETF inflows to nearly $1 billion this month and total liquidity nearing $800 million to $1 billion, according to Bitfinex analysts.
The digital asset is now trading at a nine-month low as investors assess the direction of monetary policy.
Jeff Park, CIO at Bitwise, outlines a critical framework for understanding Bitcoin's precious metals versus precious metals in “Two Bitbit Theses.”
“Metals are telling you that a bearish is happening, Bitcoin is telling you when the frame curve is breaking,” Park explained, distinguishing between “negative rho Bitcoin” that performs best when the price falls and “positive rho Bitcoin” that thrives when financial system expectations fall.
Park argued that the current environment represents the worst-case scenario for Bitcoin's “negative rho” thesis.
“We are currently experiencing a positive bearishness in the technology sector, while we are shrugging off a bearish bearishness in the credit markets,” he wrote.
“This is the worst environment for Bitcoin: profitable enough to make growth assets attractive, enough to make treasuries credible, but not catastrophic enough to break the system.”
Speaking to Cryptonews, Aurelie Barrere, principal research analyst at Nansen, identified several negative factors that could push Bitcoin lower: “Fed Chair Powell guiding for no Fed cut in its rest mandate until June 2026, President Trump the more hawkish candidate as the new Fed Chair Kevin Warsh, and BTC's correlation with US equities again.
Flow data shows “slow capital in ETFs, options and mining activity,” she said.
Eric Jackson, CEO of EMJX-SRX Health, offered an opposing view on Warsh's nomination.
“Kevin Warsh's appointment as Federal Reserve chairman appears to be neutral-to-positive for crypto development in the medium term, although the initial market reaction is cautious,” Jackson told Cryptonews.
“The focus on the balance sheet and the clear boundaries between the Treasury and the Fed mean less reactive quantitative easing and more transparency in liquidity conditions.”
Park's analysis suggests that Warsh's appointment will speed up the system's calculation and show a high appreciation for Bitcoin's “positive rho” status.
“If you believe that the debt cycle is unsustainable, if you believe that fiscal hegemony will eventually overturn monetary orthodoxy, if you believe that the risk-free rate will eventually be revealed as a fiction,” he wrote, “you need a wart.”
Although he “can't prove that $82k is really the bottom,” he concluded that historically, “bottoms are almost always marked by a change in the market system that adjusts investor behavior.”
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