Silvergate Shares Plunge 45% After $8 Billion Crypto Run Is Revealed
Shares of Silvergate Capital Corp., a crypto-focused California bank, lost almost half their value after the Wall Street Journal reported it spent the equivalent of a decade's profit and fired 40% of its workers after investors scrambled to redeem $8.1 billion in the wake of crypto exchange FTX's collapse. Silvergate, based in La Jolla, slid 45% to $12.27 as of 12:20 p.m. New York time. It was the bank's biggest one-day decline since March 12, 2020.
Silvergate (SI) sold securities and derivatives at a loss of $718 million as customers withdrew about $8.1 billion of digital deposits during the fourth quarter. This amount is far in excess of the bank’s profits since 2013, the Journal reported.
When Sam Bankman-Fried's FTX collapsed, it caused a crisis for Silvergate, which held deposits for FTX units, and Alameda Research, the trading firm behind FTX. Lawmakers are also scrutinizing the bank.
“The digital-asset industry has undergone a transformational shift, with significant over-leverage in the industry leading to several high-profile bankruptcies,” Silvergate said in a statement. “These dynamics have sparked a crisis of confidence across the ecosystem and led many industry participants to shift to a ‘risk off’ position across digital-asset trading platforms.''
In February 2022, Silvergate Bank acquired the technology and assets from Diem, the stablecoin project from Meta Platforms (formerly Facebook).Now the bank has halted its plans to launch a digital currency and has written off $196 million related to its acquisition of the technology and assets of Diem Association from Meta.
Even so, the bank emphasized that crypto would be its primary focus. “While Silvergate is taking decisive action to navigate the current
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