Silver, salvation and stablecoins

In 1973, Nelson Bunker Hunt sent a fleet of 707s to New York City to take delivery on 40 million ounces of silver. They had a crack security team riding along: cowboy guards who had won a sharp-shooting competition at the Hunt family’s Circle K ranch.

The cowboys were there to ensure that Hunt’s silver was safely loaded at LaGuardia airport and then delivered for safekeeping into the vaults of various Swiss banks in Zurich (which they promptly filled to capacity).

This was partly a tax dodge — state and local taxes would have been due if the Hunts had taken delivery in Texas. 

But it was mostly about physically securing the family fortune: “Having his silver locked away in Swiss banks,” Playboy magazine reported in 1980, “added to what Bunker wanted out of the deal most of all: a sense of security about his wealth.”

(Yes, Playboy really did do investigative journalism — and some people really did “read it for the articles.”)

Keeping his family’s vast wealth in the depreciating US dollar made him feel insecure.

‘‘Just about anything you buy, rather than paper, is better,” he told Barron’s in 1974. “If you don’t like gold, use silver, or diamonds or copper, but something.”

Hunt bought silver because it was illegal for US citizens to own gold at the time.

He sent the silver to Switzerland, guarded by sharp-shooting cowboys, because he thought it would be unsafe in the US. He expected the federal government would seize it when their irresponsible spending inevitably caused a financial apocalypse.

For Hunt, Playboy reported, “hoarding silver is not just his way of hedging inflation: It is also part of his attempt to create his own independent economy, his own money.”

But Hunt viewed silver as more than sound money — he believed it promised salvation. 

Replacing fiat currencies with silver-backed money would have “a profound moral and spiritual impact upon many nations,” he said — and serve as “a critical deterrent to the avalanche of evil that is threatening to engulf the world.”

Playboy later explained that Hunt possessed “a vision of the apocalypse” and that silver was the “fundamental expression of his worldview.”

That worldview darkened through the 1970s as his personal circumstances deteriorated: His largest asset, an oil field in Libya, was nationalized by Qaddafi; the DOJ prosecuted him for illegal wiretapping; his many business ventures floundered.

In response, he bought more silver. 

Despite being worth billions on paper, Hunt was chronically short of cash. But he was able to continue buying silver because silver was going up, giving him more valuable collateral to borrow against.

Most significantly, Hunt borrowed in order to seed a joint venture with the Saudis that would buy even more silver — “literally pyramiding bars on top of bars,” as Playboy described it.

This ended predictably. 

From just $6 at the start of 1979, Hunt-and-Saudi buying helped push the price of silver to $50 by the end of the year. 

This made the Hunt brothers among the richest people in the world — on paper.

It also caused problems for companies like Kodak, which used silver in the coating for its film, and Tiffany’s, which took out an ad in The New York Times that called the Hunt brothers “unconscionable” for driving up the price of essential goods made of silver, like baby spoons.

Most consequentially, Hunt’s relentless buying caused problems at the commodities exchanges he frequented. By taking physical delivery on expiring futures, Hunt had drained the exchanges of the silver they needed to facilitate trading.

When COMEX, the primary US commodities exchange, asked Bunker Hunt to keep things orderly by selling some of his silver futures back to the market (at a giant profit), he refused, saying he planned to buy more.

The COMEX responded by sharply raising the margin requirements for silver futures and lowering the maximum allowed position size.

When that failed to slow Hunt’s buying, the exchange went nuclear: On January 21, COMEX announced that trading would be limited to liquidation orders only. “There would be no more futures buying,” Playboy wrote. “The game was closing down.”

The price of silver fell $10 the next day, to $34, and continued to fall in the weeks that followed. 

It later came to light that nine of the 23 COMEX board members were short silver futures equivalent to 38 million ounces of silver.

So you can see why they closed the game down.

(Financial conspiracy theories sometimes do come true.)

Even then, however, Hunt continued buying, including stakes in a silver-mining concern and a silver broker.

But rising interest rates and easing world tensions accelerated the selloff in commodities generally and, thanks to the COMEX’s rule changes, silver in particular.

On March 25, with the price of silver down to $21, the Hunts faced a $135 million margin call from their primary broker. 

Herbert Hunt had shocking news for them: “We can’t make it.”

In total, Bunker’s silver position left the Hunt brothers $1.4 billion in debt and without the liquid assets to service it.

The Hunts eventually reached a debt-servicing deal that pledged away their most valuable oil assets to their lenders, but allowed them to keep some of their silver, which Bunker, ever the pessimist, thought would soon rebound and pay off their debts.

It didn’t. By the end of the 1980s, silver had come to be viewed as a true commodity — of niche industrial value, and of no value at all to investors.

40 years later, that perception has finally started to change.

Apocalypse now?

Financial markets were reminded of the Hunt brothers when silver crashed 28% this past Friday.

Appropriately, crypto had a hand in the selloff: Margin calls in bitcoin appeared to accelerate the selling, likely because silver longs on perps exchanges like Hyperliquid were cross-margined against bitcoin longs.

More instructive than the price action, however, is the crypto worldview that led to it.

Because bitcoin has been languishing lately, crypto traders have been expressing their apocalyptic worldview by buying perpetual futures on the price of silver instead.

On Hyperliquid alone, $142 million of those futures were liquidated on Friday — even more than the Hunts’ $135 million margin call!

Like the Hunt family, crypto traders learned a lesson in leverage: Buying silver futures on an exchange, with money provided by the exchange, is not the same as owning silver.

But crypto also has a spiritual successor to Bunker Hunt who knows this: Tether CEO Paolo Ardoino.

“We believe that the world is going towards darkness,” Ardoino says, in language that Bunker Hunt would have appreciated.

The biblical-minded Hunt would especially appreciate Tether’s unorthodox marketing: “Build for the apocalypse,” Ardoino told a Bitcoin conference in 2024. 

And Hunt would have wholeheartedly approved of Tether’s survival plan: “We are soon becoming basically one of the biggest, let’s say, gold central banks in the world,” Ardoino explains.

They’re well on their way: Tether now owns about 140 tons of gold, worth about $24 billion, and is adding one to two tons to their hoard every week.

Ardoino is hoarding that gold for the same reason that Hunt hoarded silver: He expects fiat currencies to collapse and be replaced by commodity money. “We believe that these countries will soon launch tokenized versions of gold as a competitive currency to the US dollar,” Ardoino predicts.

When that day comes, Tether will be there to provide the commodities — because Ardoino is Hunt, but smarter.  

Like Hunt, Ardoino is buying precious metals with borrowed money. But unlike Hunt, he’s borrowing for free by issuing USDT, so he’s at no risk of a margin call.

Also like Hunt, Ardoino is incurring the considerable cost of shipping his precious metal to Switzerland.

But Ardoino takes this extraordinary precaution even further by also incurring the cost of self-custody. 

Whereas Bunker Hunt entrusted his silver to Swiss banks, Ardoino has built his own, well, bunker — a nuclear bunker in Switzerland that Tether has converted to store and guard its ever-growing mountain of gold. 

Expensive, but it makes sense. If you truly believe in financial apocalypse, even Swiss banks aren’t safe enough. You have to custody the metal yourself.

Like Hunt, Ardoino believes the financial apocalypse is nigh. Unlike Hunt, he can afford to wait for it, even if it’s not here yet.

That, ultimately, is the lesson to learn from Bunker Hunt.

Financial apocalypse can take longer to happen than you might expect — and far longer than you can stay leveraged. 

— Byron Gilliam

Crypto’s premier institutional conference is back this March 24–26 in NYC.

Don’t miss SEC Chairman Paul S. Atkins’ keynote on Day 1.