Silvergate Stock’s Decline and Its Connection With Other Firms

Silvergate Capital’s stock fell 43% on Thursday.
The bank is a leading crypto-friendly bank.

The Silvergate Exchange Network (SEN) of the Bank is an immediate payment network for users of the digital currency market and a platform for the creation of new goods and services. The Firm created the SEN network of digital currency exchanges and investors, which permits movement within the US.

Silvergate Stock Plummets Following Financial Blow

SI stock saw an almost 50% decline on Thursday as the cryptocurrency-focused bank disclosed a massive loss due to a challenge to raise funds as deposits fell sharply in the fourth quarter. The company shares which were once among the preferred stocks by Wall Street and has established itself as a major banker for the digital asset sector, dropped 91% in 2022.

The decline was primarily brought on by a troubling report regarding activity in an account connected to a well-known cryptocurrency exchange. Investors responded sharply, sending the share price down, concluding the session more than 22% lower than its previous close.

A leading cryptocurrency exchange had transferred significant sums of money from a Silvergate bank account that it covertly controlled, according to reports published by Reuters on Thursday morning. The account belonged to the US arm of the cryptocurrency exchange. This arm/subsidiary is conceptually separate from the larger company that bears its name.

According to the report, bank records reveal that Merit Peak, a trading company, received a transfer from the account in the first quarter of 2021 of more than $400 million. Flows from the account to Merit Peak began in late 2020, the paper stated, citing business messaging.

BlackRock Among The Major Investors

The largest asset manager in the world, BlackRock, confirmed a sizable investment in the battered cryptocurrency banking Silvergate Capital. Silvergate’s stock may have changed significantly on Tuesday as a result of the disclosure, in a manner unrelated to the regularity of BlackRock’s filing.

BlackRock (NYSE: BLK) revealed a 7.2% holding in Silvergate in a filing with the Securities and Exchange Commission on Tuesday. BlackRock now ranks among the bank’s biggest shareholders. BlackRock, however, is one of the biggest index fund managers in the world, therefore it is highly unlikely that the statement reflects a fundamental opinion on the company rather than a change in index positions or fund flows.

Currently, customers using cryptocurrencies account for about 90% of Silvergate’s overall deposits. Its lending book has dwindled and its branches have fallen off. It only holds money; it does not hold cryptocurrencies.

Investors reduced their holdings in the bank after FTX collapsed as they feared for the safety of their deposits. Silvergate said it had no further lending or investment exposures other than the FTX deposits it owned. It claimed that it had $9.8 billion in digital deposits by 3rd quarter’s end, a decrease of $2.2 billion including the removal of FTX deposits.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing