Silvergate’s deepening crisis shocks crypto stocks

  • Silvergate shares close 6.4% lower
  • Bank suspends crypto payment network
  • Fallout is dragging down several crypto stocks

March 6 (Reuters) – Shares of Silvergate Capital Corp (SI.N) fell as much as 11% on Monday after the bank suspended its crypto payment network and cast doubt on the viability of its business.

The stock closed the volatile session 6.4% lower at $5.40, following wild swings between gains and losses throughout the day.

Several crypto stocks also closed in negative territory. Crypto lending partner Signature Bank (SBNY.O) fell 2.5%. BTC mining machine makers Ebang International and Canaan Inc (CAN.O) fell 2.8% and 8.4% respectively. BTC copper MicroStrategy (MSTR.O) was down 3.8% and exchange Coinbase Global (COIN.O) was down 2.7%.

Crypto-focused bank Silvergate said late Friday that it had made a “risk-based decision” to shut down the Silvergate Exchange Network (SEN) with immediate effect.

“The SEN is Silvergate’s most important flagship product that has previously been the main attraction for depositors to bring money to the bank,” Wedbush analysts said.

The shutdown could be a signal that Silvergate is considering winding down its business, she added.

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Shares of Silvergate hit a record low of $4.86 on Friday, losing nearly 98% of their value since closing at a record high in November 2021, wiping out more than $7 billion in the company’s market cap.

“The crypto market reacted to the negative news from Silvergate Bank, with both bitcoin and ethereum down about 4.8% this week,” analysts at brokerage Bernstein said.

Reuters chart

“We believe a receivership/liquidation scenario is a clear possibility and are coming in at a liquidation value of $5 per share,” said Wedbush analysts. The estimated price marks a drop of about 13% from the stock’s previous close.

A slew of crypto heavyweights, including Coinbase Global, have dropped Silvergate as their banking partner.

The company struggled to stay afloat after the collapse of Sam Bankman-Fried’s crypto exchange FTX in November prompted investors to raise $8 billion in deposits from the bank in the last three months of the year.

Reuters chart

Silvergate reported a net loss of $1 billion in the fourth quarter.

Reporting by Manya Saini in Bengaluru; Edited by Anil D’Silva, Devika Syamnath and Krishna Chandra Eluri

Our Standards: The Thomson Reuters Principles of Trust.


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