The cryptocurrency bank Silvergate may stop operating after warning last week that it might be short on money.
Deposits at Silvergate are down 42%
In light of the ongoing legal dispute, Silvergate Capital Corp.’s shares have been under pressure since it revealed on January 17 a sharp fall in deposits related to cryptocurrencies in the fourth quarter.
Shares of the corporation fell by more than 42%. This comes after the collapse of FTX scared away investors and caused more than $8 billion in deposits to be withdrawn.
From $11.9 billion at the end of September to $3.8 billion at the end of December, the total deposits from its users of digital assets dropped. In order to cover the withdrawals after the FTX collapse, Silvergate was compelled to liquidate the debt on its balance sheet, which resulted in a $718 million loss.
In addition, the business had to reduce its workforce in order to “account for the economic realities facing the business and industry today.”A risk-based decision has to be made by Silvergate as a result of consumers’ deposits for digital assets falling.
The bank’s most popular service, the Silvergate Exchange Network (SEN), which allowed for round-the-clock transactions between investors and cryptocurrency exchanges, was shut down as a result.
The bank’s revelation that it would be delaying the submission of its annual report caused many individuals to fear that the organization was ready to file for bankruptcy, which resulted in a sharp decline in the price of Silvergate stock.
When Silvergate delayed publishing its annual 10-K report on March 2, Canaccord and JPMorgan downgraded the company and stated that they were “currently analyzing certain regulatory and other inquiries and other investigations” in addition to the bank’s ability to survive for the following 12 months. As a result, the stock of the cryptocurrency bank fell 53.0% on March 2.
In addition, some of Silvergate’s partners, including Coinbase, Bitstamp, Galaxy Digital, Paxos, and Circle, have distanced themselves from the company amid solvency concerns. Silvergate is known for its affiliation with crypto firms.
