Tag: silvergate
Bitcoin on track for ~10% weekly loss on Fed fears, end of Silvergate Bank
Silvergate Bankrupt!! What it Means For Crypto!
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Top US crypto bank Silvergate has gone into liquidation
The cryptocurrency bubble has well and truly burst, and now it’s taking down the banks.
Silvergate Bank, one of the largest cryptocurrency banks in the US, has announced it is going into liquidation.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” holding company Silvergate Capital Corporation announced on Wednesday. “The Bank’s wind down and liquidation plan includes full repayment of all deposits.”
This comes just five days after Silvergate Bank announced it would discontinue the Silvergate Exchange Network, an instant funds transfer system that was one of its key services. The company has reassured customers that its other deposit-related services are continuing to operate as it winds down, but anyone who has business with Silvergate probably won’t want to rely on that.
Based in California, Silvergate Bank turned to cryptocurrency in 2013 and eventually became one of the top US crypto banks. But the higher they rise the harder they fall, and to anyone following Silvergate’s woes, the writing has been on the wall for a while.
FTX’s dramatic collapse late last year had a significant impact on Silvergate, as the crypto exchange had been one of the bank’s biggest customers. This triggered an $8.1 billion bank run on Silvergate, forcing it to liquidate $5.2 billion in debt securities to cover the withdrawals and take a $718 million loss — a loss which vastly exceeded the bank’s profit since 2013.
Silvergate also laid off 40 percent of its workforce in January, sending its stock plummeting by 46 percent, while deposits in the fourth quarter fell by around 68 percent. Reading the signs, a laundry list of large crypto exchanges such as Coinbase and Galaxy Digital cut ties with Silvergate last week, which likely exacerbated the bank’s struggles.
At its height, Silvergate Bank was valued at $222 per share in Nov. 2021. Last week ended with Silverbank at $5.77 per share, and as of writing it is currently valued at $2.76 — a drop of over 98 percent since its peak.
Crypto Bank Silvergate Capital To Shut Down
When customers pulled more than $8 billion from its platform late last year, the bank got a $4.3 billion assist in home loan advances from the Federal Home Loan Bank (FHLB). It effectively benefited from an implicit government backstop. But between having to pay those loans back right away and other investment losses, its outlook was grim, even before the company filed a registration statement saying so.
The overwhelming majority of bank liquidations are announced on a Friday afternoon, to give the FDIC a full weekend to shore up the institution and reassure depositors before the next business day. The fact this happened on a Wednesday is an indication of just how quickly Silvergate imploded. “Crypto exchanges, platforms and stablecoin issuers at least have the excuse that they don’t have direct access to central bank liquidity,” Frances Coppola, an economist and writer of blog Coppola Comment, said in a recent post about the bank. “But Silvergate does — and yet it didn’t use it.” That would appear to be an oversight for the bank, but also its regulator.
Read more of this story at Slashdot.
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Silvergate suspends USD transfer network for crypto, institutional investor clients
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