More importantly, if Redditors, and whoever else has jumped onto the bandwagon at this point, continue bidding up SLV because of its discrepancy with physical prices, the situation will only get worse.

If there is one thing that can be known with certainty in advance, it is that someone out there is bound to completely misunderstand the situation and call for people to buy the ETF because it is “undervalued”.

APs might deem the price spread between ETF and physical silver to be impossible to close given market conditions, and simply allow the disconnect between both to continue.

If this happens, SLV’s management might decide to expand their remit to enter into futures/swaps/forwards positions in order to keep the price of the ETF in line with the physical market.

What happens then?

Expect a lot of volatility as the APs come back to reassert the relationship between SLV and its new basket of underlying assets. If SLV was bid up too high relative to the value of the new basket, sharp falls in the ETF’s price can be expected.

If SLV was not bid up enough, then the ETF’s price would be expected to rally sharply. 

At this point, it is important to note that if this sequence of events occurs, it would be a squeeze that was created by Reddit, except the ones they are squeezing would be themselves, similar to what happened with GME.

As explained previously, it is unlikely that the price of silver has been manipulated, which means that the hypothetical squeeze in physical only happened because Reddit piled into SLV.

If this hypothetical squeeze caused ETF prices to jump higher and bring in more Redditors, they would be buying from the first group of Redditors!

Who’s squeezing whom then?