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.
Lots of chatter on Silvergate being in imminent danger. If you still hold cash there, I’d pull that immediately.— Travis Kling (@Travis_Kling) March 2, 2023
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.
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.