Silvergate Capital: This is why the stock of the crypto bank is going down

Shares in crypto-friendly US bank Silvergate Capital fell more than 40 percent at the start of trading in New York on Thursday. The reason for this is the preliminary 4th quarter figures that the company published shortly before. This shows that crypto customers have recently withdrawn huge amounts of capital.

Based on preliminary figures, customer deposits in the “Digital Assets” division fell from $11.9 billion at the end of the third quarter to just $3.8 billion at the end of the year. This corresponds to a decrease of around 68 percent.

As justification, the company refers, among other things, to the crypto exchange FTX’s scandalous bankruptcy, which triggered a “crisis of confidence in the entire ecosystem”. After CNBCinformation, FTX also counted among Silvergate’s customers. In total, the bank puts the deposits from business customers who are undergoing bankruptcy proceedings at $150 million.

Liquidity secured for the time being – 200 positions will be cut

To stay afloat in the face of heavy cash flows, the company sold $5.2 billion in debt securities in the fourth quarter, resulting in a loss of $718 million. As of Dec. 31, Silvergate had $4.6 billion in cash and cash equivalents, which is more than remaining customer deposits in the digital asset space, according to CEO Alan Lane.

Reflecting the “rapid pace of change” in the industry and the “economic realities facing the company,” Silvergate also announced massive job cuts Thursday. Around 200 employees will be leaving, which corresponds to around 40 percent of the entire workforce.

The company estimates the costs associated with the wave of layoffs, for example for severance pay, at eight million dollars. Most of them are due to be published in the current first quarter.

Silvergate will publish final figures for the latest fourth quarter and full year 2022 on 17 January.

Silvergate Capital Corp
(WKN: A2PCBX)

Silvergate’s stock plunged more than 40 percent in early trading on Wall Street on Thursday — having already lost 88 percent over the past year. It shows impressively that a stock that is already deep in the red can still fall far. A fate that could possibly flourish for other industry players in light of the ongoing crypto winter.

The share is not on the SHAREHOLDER’s list of recommendations. Investors shouldn’t grab a falling knife now either.

Notice of conflicts of interest:

CEO and majority owner of the publisher Börsenmedien AG, Mr. Bernd Förtsch, has taken direct and indirect positions on the following financial instruments mentioned in the publication or related derivatives that may benefit from any price development resulting from the publication: Bitcoin.

The editor-in-chief of the publisher Börsenmedien AG, Mr. Leon Müller, has taken direct and indirect positions on the following financial instruments mentioned in the publication or related derivatives that may benefit from any price development resulting from the publication: Bitcoin.

The author has direct positions in the following financial instruments mentioned in the publication or related derivatives that may benefit from any price development resulting from the publication: Bitcoin.

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