Crypto traders get liquidated by ‘safe’ silver

Crypto traders switched to precious metals, chasing the upside of gold and silver. Just days after expanding token-based silver markets, the price shifted direction. 

Crypto traders adapted to the underwhelming performance by switching to silver, last year’s big runner. Silver set out for a series of records in 2026 as well, leading to a trading rush to make use of a newly active asset. 

Until recently, only tokenized gold was more actively traded. However, silver turned into an appealing access point, with predictions for an ongoing rally. Crypto platforms adapted, as new markets emerged for silver contracts through Hyperliquid’s HIP-3. 

Precious metal tokens and perpetual futures replaced the sluggish altcoin market with a higher upside and presumably, a more stable price action. 

Traditional assets, even when volatile, rarely had wild price swings within hours. However, silver’s recent breakdown defied this narrative, leading to another round of liquidations for crypto traders. Silver surged by leaps in January, rising up to 20% in days and becoming the new darling of both traditional and on-chain traders. 

Silver reversal led to liquidations

Silver crashed from over $120 per ounce to around $101, affecting both traditional and crypto markets. 

Most of the liquidity for silver was available through HIP-3, and the trading pairs were deployed in the past two weeks. 

One of the major liquidations happened on XYZ: silver, a new perpetual futures pair by an independent deployer. One of the whales had a position for over $8.99B liquidated in a single transaction. 

In total, Hyperliquid saw $11M in silver positions wiped out, as the same whale lost a smaller position of $2.21M. 

An unraveling of this speed has been anticipated for BTC or altcoins. However, the precious metals market has rarely shown this type of price action, especially the highly improbable correction. Silver is still up by 208% in the past year, though crypto traders only caught the latest segment of the pump above $100.

Will silver traders rotate back to crypto?

On-chain silver markets are still in their early stage. Silver itself behaves not unlike volatile altcoins, causing a similar effect. For now, volumes may continue to flow into silver contracts, as HIP-3 is just starting to grow its influence. 

As of January 27, HIP-3 set another trading record with $1.79B in daily volumes. Silver is also the main driver of the user and fee records in recent days. During the market climb, the market caused a series of short liquidations. 

The other problem is that on-chain silver trading is mostly limited to a single market, concentrating risk. Additionally, on-chain markets may face some confusion on the actual price of spot silver, which has closing hours and does not trade 24/7. The contracts are also not a store of value, since they only offer price speculation and are not a tokenized real asset.