March 29, 2023

End of Silvergate sinks cryptocurrency and bitcoin stocks to two-month lows

Bitcoin hit two-month lows and shares of companies linked to the cryptocurrency market fell after Silvergate Capital – the parent company of “crypto-friedly” Silvergate Bank – announced it would close its doors.

Bitcoin continues to fall 1.83% to $21,130.57, renewing the mid-January 20 lows.

In the stock market, cryptocurrency platform Coinbase, which last week cut ties with Silvergate, plunged 8.62% to $57.58, its lowest since February 14.

In turn, mining company Riot Blockchain is down 9.84%, while Marathon Digital is down 7.84%.

At the center of this crisis, Silvergate Capital plunges 20.37%. Since the beginning of this year, the holding has already sunk in the stock market by 72% this year, 95% in the past 12 months.

This fall fueled short-sellers sentiment. Currently, nearly 85% of “free float” is shorted, according to S3 Partners.

The moves in these assets come after this Wednesday Silvergate Capital announced what the market feared the most: the end of operations and the liquidation of its bank – the main creditor of platforms and other crypto entities.

The liquidation plan provides for the repayment of all deposits held in the bank.

Silvergate was brutally hit by the fall of the FTX platform. In January, the foundation explained that rising withdrawals had forced it to sell billions of dollars in assets to balance the books. In the last quarter, Silvergate Capital posted a loss of about $1 billion.

On March 4, Silvergate Capital announced the end of its crypto payment network, the Silvergate Exchange Network, after several clients, including Coinbase, pulled out due to uncertainty surrounding liquidity and solvency. This network has allowed both investors and cryptocurrency platforms to trade assets quickly and securely.

That decision came two days after the company informed the US financial regulator that it would not be able to present annual results on the scheduled date and was considering whether it could continue to operate.

Since that announcement, Silvergate Capital shares have fallen nearly 10%, extending a nearly 85% decline since last November, when FTX filed for creditor protection.

Silvergate Capital is the parent company of Silvergate Bank, a bank dedicated since 2013 to the universe of crypto assets, focusing on leveraging institutional clients and loans to these entities and providing the aforementioned payment network, which has since been discontinued.

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