Cryptocurrency market capitalization fell by 6.3% amid the Silvergate Bank crisis.
Silvergate Bank which is the leading bank for innovative businesses in fintech and cryptocurrency had announced it will discontinue its crypto-related services.
Before now, Silvergate had a solid partnership with Coinbase, Digital Galaxy, Paxos, Gemini, BitStamp and provides financial infrastructure to many other institutional investors.
The Silvergate debacle is coming after the collapse of FTX which took the crypto industry by surprise, leading to the loss of billions of dollars of funds belonging to retail and institutional investors. Additionally, there were also reports that Silvergate has a financial relationship with FTX.
Investors King understands that Silvergate Bank lost more than $8 billion in deposits from its crypto customers in the final months of 2022 as its business crumbles.
Since the crypto boom of 2021 where Silvergate transfers peaked at $406 billion, the bank’s transfers have slid down to $203 billion at the end of Q4, 2022. Thereby, causing serious liquidity issues.
It is therefore not surprising that the share price of the bank (Silvergate) plummeted by nearly 50% in early trading on Thursday after fresh revelations about the extent of its exposure to the collapse of crypto exchange FTX. The bank’s stock fell from $13.53% to $7.60%.
A day before losing nearly 50% of its stock value, Silvergate had delayed the publication of its annual report and announced a fresh sale of assets to repay debts. It also warned of further regulatory scrutiny which may affect its profitability.
This warning caused a flurry of activity, with major partners including crypto exchange Coinbase dropping Silvergate in a rush to safety, thereby further causing the crypto market cap more downward pressure.
Coinbase, which used Silvergate to handle cash transactions for customers, noted in a statement that in “light of recent developments and out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.
