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Home » Crypto Market Distances Itself From Silvergate, Will It Follow In FTX’s Footsteps?

Crypto Market Distances Itself From Silvergate, Will It Follow In FTX’s Footsteps?

Hania by Hania
March 3, 2023
in General News
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Crypto Market Distances Itself From Silvergate, Will It Follow In FTX's Footsteps_
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  • Is Silvergate About To Collapse?
  • The Decline and Fall of Silvergate

As concerns about Silvergate’s sustainability for the upcoming year grow, the company is experiencing financial distress as its share price has fallen by 50%.

The crypto-friendly bank Silvergate Capital’s shares have plummeted after the business said it would delay the publication of its annual report and would reveal additional losses. On Thursday, a number of cryptocurrency companies released statements in an effort to distance themselves from the bank.

Is Silvergate About To Collapse?

Crypto Market Distances Itself From Silvergate, Will It Follow In FTX's Footsteps

Coinbase Global Inc., the largest cryptocurrency trading platform in the United States, said that it had terminated ties with Silvergate due to the bank’s ongoing regulatory issues. After this, stablecoin issuer Paxos Trust Co. LLC issued a similar declaration about cutting ties with the bank.

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Furthermore, prominent companies such as Galaxy Digital, Gemini, and BitStamp have all released statements indicating that they have cut ties to the once-essential partner that linked them to the traditional banking system. These statements are in addition to those made by Coinbase and Paxos. Silvergate announced that it will be “evaluating the impact that these subsequent developments have on its ability to continue as a going concern for the twelve months following the publishing of its financial statements” prior to the delayed annual report’s release.

Following the announcement, Silvergate Bank stock fell more than 50% to $6.52 in early morning trade. Coinbase, a leading cryptocurrency exchange, also suffered a setback and saw its share price fall by 8% to $59.47.

The Decline and Fall of Silvergate

Crypto Market Distances Itself From Silvergate, Will It Follow In FTX's Footsteps

Four months later, the industry is still experiencing the adverse effects of FTX, as companies of all kinds are struggling with the general market as well as the pain of being associated with Sam Bankman-Fried’s failing cryptocurrency company. Even before the launch of the cryptocurrency exchange in 2018, Alameda Research, the trading arm of FTX, was a source of revenue for Silvergate.

In contrast, Silvergate had a significant bank run after the FTX collapse in November 2022, as shown by the fact that customers withdrew more than $8 billion from the bank in just the fourth quarter.

On January 5, 2023, Silvergate announced the termination of 40% of its workers while also securing a number of loans, including a $4.3 billion loan from the Federal Home Loan Bank. As a result of its financial crisis, Silvergate postponed its ambitions to introduce a virtual currency and write off $196 million related to its purchase of the assets associated with Facebook’s failed project Diem.

Market participants and industry analysts believe that Silvergate may soon declare bankruptcy after the deadline of March 16 and follow in the footsteps of FTX. Due to the ongoing investigations and the most recent termination of partnerships, Silvergate is currently one of the most shorted companies on the market. According to the Financial Industry Regulation Authority, as of January 31, total short positions represented more than 72% of the shares of Silvergate Capital.

Tags: FTX and AlamedaSam Bankman-FriedSilvergate Capital
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Hania

Hania

Hania is a 30-year-old blogger who used to be a teacher before entering the world of writing. She is originally from India and has been writing blogs on various topics for 2 years now. Hania is particularly interested in exploring the intersections of finance, technology, and cryptocurrency. Her experience as a teacher has given her unique insights into the ways in which digital media can be used to facilitate learning and engagement. Through her writing, Hania hopes to share her knowledge and learning of crypto industry with everyone.

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