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Silvergate at Risk of Bank Run as FUD Rises, Here's Reason

Thu, 03/02/2023 - 11:27
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Godfrey Benjamin
Silvergate stock dropped by about 30% as financials raise concerns
Silvergate at Risk of Bank Run as FUD Rises, Here's Reason
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Investors are currently not looking lightly at the crypto ecosystem's premier banking firm, Silvergate Capital Corp, whose stock is currently on a major freefall. Besides closing Wednesday's trading session at a 2.773% loss, it slipped further by close to 30% on the pre-market today.

In what is looking like another possible bank run just like that which pushed bankrupt crypto trading firm FTX Derivatives Exchange into a damning liquidity crunch last November, leaders in the digital currency ecosystem are already advising the bank's customers to withdraw their funds.

The loss in investor confidence came from the failure of the company to file its Form 10-K for the previous fiscal year. According to a filing, the firm said it is currently conducting analysis, recording journal entries related to subsequent events and completing management's evaluation of internal controls over financial reporting.

This excuse is considered unwholesome by analysts, a signal that something may not be balanced in the firm's books. This will not come as a surprise, though, as Silvergate Bank had a major working relationship with FTX. The firm had clarified that its relationship is limited to deposits, but with prying eyes from regulators, the discomfort among investors is growing.

$3.5 Billion Company Just Bet $100 Million on Bitcoin by Securing Revolving Credit Line with Silvergate

Silvergate Bank as gatekeeper

Silvergate Bank currently plays a vital role in the broader digital asset ecosystem and serves as a major regulated banking partner for hundreds of crypto entities in North America and around the world.

The firm's business is also hinged on lending, having extended a credit facility worth $205 million to Michael Saylor's business intelligence firm, MicroStrategy Incorporated, in order to buy Bitcoin. Related loan products have also been launched through a partnership with Fidelity Investments, one of the largest asset managers in the U.S.

In order to allay its investors' fears, Silvergate has to release its financials as soon as possible.

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About the author

Godfrey Benjamin is an experienced crypto journalist whose main goal is to educate everyone around him about the prospects of Web 3.0. His love for crypto was birthed when, as a former banker, he discovered the obvious advantages of decentralized money over traditional payments. With his vast experience covering various aspects of Web3, Godfrey's articles has been featured on, Cryptonews and Coingape, among others.