It’s more dangerous as it rises? The systemic risks behind SpaceX’s skyrocketing valuation

Original Title: SpaceX Could Get Dangerously Systemic

Original Author: Quoth The Raven

Original Translation: Peggy, BlockBeats

Editor's Note: After SpaceX's after-hours market capitalization surpassed $3 trillion, this article raises a sharper question than "what is it really worth": When a company, driven by limited circulating shares, options trading, and market sentiment, can add hundreds of billions of dollars in market cap in a single day, is the capital market still performing price discovery, or has it become a self-reinforcing speculative machine?

The author's core judgment does not deny SpaceX's commercial prospects. SpaceX could still be one of the most important space infrastructure companies globally and possess immense long-term potential. However, this article focuses on another issue: If stock prices are primarily driven by bullish option buying, market maker hedging, momentum chasing, and passive fund allocation, then valuation no longer merely "reflects value" but begins to "create value." Price increases themselves become a new reason for bullishness, pushing fundamentals to the sidelines.

The gamma squeeze repeatedly mentioned in the article—a feedback loop where options market makers are forced to buy stocks to hedge, further driving up prices—is key to understanding this piece. Over the past few years, similar mechanisms have repeatedly appeared in Tesla, certain meme stocks, and high-momentum tech stocks. The author fears that if SpaceX replicates this path and is further propelled by its own narrative strength, limited float, and Elon Musk's personal influence, it could evolve from a high-valuation stock into a systemic variable for the entire market.

The more dangerous aspect lies in indexing and passive investing. When a company's market cap is large enough, it gets included in major indices, passively held by ETFs, pensions, retirement accounts, sovereign wealth funds, and institutional portfolios. At this point, the bubble is no longer the adventure of a few traders but enters the long-term asset allocation of ordinary investors. The higher it rises, the harder it is for the market to avoid it; and the harder it is to avoid, the more capital tends to flow toward it.

Therefore, this article isn't really discussing whether SpaceX will become a $5 trillion or $10 trillion company. It's about a structural paradox of modern capital markets: When market mechanisms can amplify narrative, leverage, and liquidity to a degree that overwhelms fundamentals, can so-called "price discovery" still hold? SpaceX is just an extreme case, but the problem it exposes may be more universal—in today's U.S. stock market, systemic risk sometimes doesn't start with bad companies, but with the most beloved, most unavoidable ones.

The following is the original text:

"Things only get weirder and weirder and weirder, until they get to a point where people start to talk about how weird they are."

— Terence McKenna

For the past few years, I've been asking: How absurd does it need to get before we admit the stock market is fundamentally broken? After seeing SpaceX's massive surge in after-hours trading today, I think the answer is clear: The market has long been broken. The real question is just how ridiculous it needs to become before others notice.

SpaceX's market cap surpassed $3 trillion in after-hours trading. This means its valuation has exceeded Amazon and Microsoft. Microsoft generates hundreds of billions in annual revenue with over $100 billion in yearly profit. Amazon has annual revenue exceeding $700 billion and profits in the tens of billions. Now, SpaceX is valued higher than both.

SpaceX's relatively limited float makes it an ideal target for a manipulative short squeeze. Towards the end of after-hours trading, its stock price neared $230 per share. In a single day, a company still losing billions annually added approximately $650 billion in market value.

$650 billion. Not over a year. Not over a decade. In one day. And tomorrow, SpaceX options begin trading. As I predicted before, I bet it could be squeezed even further.

This is the truly unsettling part. Because I've written for years about what happens when options activity becomes the primary driver of price action.

We've seen this playbook before: Call buyers pile in, market makers are forced to hedge, the stock rises, momentum traders chase, more calls are bought, and the cycle self-reinforces.

As of 10:30 AM Eastern Time, the first day of SpaceX options trading, over 500,000 contracts had changed hands, representing a notional size of approximately 50 million shares.

The $380 strike call expiring in two days—currently the deepest out-of-the-money contract available—was the second most popular strike among calls expiring this week and the hottest strike in early trading.

At some point, price stops measuring value and starts creating it. Valuation itself becomes the bullish narrative. The company's industry and fundamentals become entirely irrelevant. At that point, the market formally begins to do what it is not supposed to do.

This is why tomorrow matters. Because a company already exhibiting strong squeeze characteristics will have options begin trading. And its "sister company" has experienced a similar situation.

I've written for years that modern markets are increasingly driven by mechanical forces rather than fundamental analysis. Tomorrow could become one of the clearest illustrations of this judgment.

My expectation is that the launch of SPCX options trading won't improve price discovery but will further distort it. If aggressive call buying emerges, market makers' hedging behavior could create a reflexive feedback loop, similar to the mechanism that drove Tesla and other momentum stocks to spectacular, yet utterly illogical, rallies over the past decade.

At that point, price movements will have nothing to do with business fundamentals and everything to do with market structure. If SpaceX indeed experiences the gamma squeeze many traders openly anticipate, I believe this will further prove that modern markets have become useless and extremely dangerous for ordinary people's retirement accounts.

Because markets are supposed to allocate capital and facilitate price discovery. They are supposed to connect valuation—however imperfectly—with economic reality. Markets are not supposed to become self-reinforcing feedback machines that add hundreds of billions or trillions in market cap to a company based purely on mechanical flows.

The problem isn't whether SpaceX is a good company. The problem is whether the market structure surrounding it is healthy.

Because if a company can become more valuable than Microsoft and Amazon with only a fraction of their revenue and profit, and could surpass Nvidia tomorrow, what is the limiting factor? What stops it from becoming a $5 trillion company? And what stops it from becoming a $10 trillion company?

Image Source: Zero Hedge Twitter

If the same options-driven feedback loop that propelled Tesla's surge after late 2019 appears here, then these numbers are no longer as unimaginable as they once seemed. And this is the part no one wants to discuss.

Everyone wants to talk about how high SpaceX can go. No one wants to discuss what happens if it actually gets there.

If SpaceX reaches a $10 trillion market cap, it would mean a single company is valued at roughly one-third of U.S. GDP. It would be large enough to dominate passive indices, retirement accounts, ETFs, pensions, and institutional portfolios. Its ups and downs would increasingly determine the performance of the entire market—all while it isn't even profitable. It would become the greatest and most dangerous hype machine in human history.

Think about what this means for Elon Musk. If SpaceX reaches a $10 trillion valuation, Musk's personal wealth would enter a range never seen in modern history. His net worth is already equivalent to 40% of all currency in circulation.

Image Source: Zero Hedge

And he isn't just richer than the second-richest person. He could soon be about ten times richer.

The gap between Musk and other billionaires could exceed the total wealth of some developed countries. At that point, we are no longer discussing wealth creation in the ordinary sense.

What happens if SpaceX's market cap, due to some gamma squeeze malfunction, actually surges to $28 trillion? That's roughly equivalent to the entire annual economic output of the United States. Would people finally start questioning the market? Or would they continue to find new reasons to rationalize it all?

Because every bubble in history works this way. Every new high is taken as proof that the previous high was too low. Every speculative frenzy is packaged as innovation—just ask "innovation expert" Cathie Wood. Every squeeze is interpreted as genius. Every warning becomes evidence that "skeptics don't understand the future."

The most astonishing thing about SpaceX breaking $3 trillion is not the valuation itself.

It's that if it keeps rising, it will become too large to ignore. At some point, we must stop discussing SpaceX itself and instead discuss the system that created it: a speculative machine that has completely detached from its original function.

The danger is that once a company reaches a certain scale, the distortion itself becomes systemic risk. Every passive fund must hold it. Every major index relies on it. Pensions, retirement accounts, sovereign wealth funds, insurance companies, and institutional portfolios become increasingly exposed to the same trade. The higher it rises, the more unavoidable it becomes.

This is the part no one truly understands.

If SpaceX eventually reaches $10 trillion driven by hype, narrative, mechanical flows, and options-driven feedback loops, it will no longer be just a story about SpaceX. It will become the market. Its movements will increasingly dictate the performance of indices, ETFs, and retirement accounts across the entire financial system. The market would effectively become a referendum on a single stock.

This is how bubbles become systemic risks. Not when they are small enough to be ridiculed, but when they become so large that everyone is forced to participate. The same mechanisms driving prices up today will ultimately create the conditions for instability tomorrow. When trillions of dollars in wealth are tied to a valuation never truly anchored to fundamentals, even a modest correction could have consequences far beyond that single stock.

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