silvergate goes to liquidate your business. The end of his career comes after a quarter of a century as a bank and a decade as a ‘crypto’ bank. The change in strategy now shows the results of having bet everything on the digital asset industry. A developing market, with inherent volatility, large doses of risk and lack of regulation. FTX was one of his clients.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly closure of operations and voluntary liquidation is the best way forward,” the company said in a statement. The decision inevitably comes after the losses reaped, its weak capitalization and the deterioration of its investments and its business. Last week, the firm took stock of its situation and doubted its own continuity, in a notification to the SEC, and, a few days later, it ends up confirming that its situation was untenable.
Silvergate has paid for this wear on the stock market after leaving 95% of its value in the last six months. The puncture reflects how turbulent this period has been for the firm. First, investors began dumping risky assets in the face of rising interest rates, wiping millions of dollars out of the industry last year. Then the scam of the Terra USD (UST) stablecoin and its associated Luna token broke out. So, the losses went to more. And the final blow came with the bankruptcy of FTX and the crisis of confidence that it unleashed.
All of this made many of Silvergate’s clients decide to leave the market, resulting in a “massive” flight of funds, as the company acknowledged in the latest results presentation. In these accounts, from October to December 2022, their losses amounted to 1,000 million dollars. Today, its capitalization is barely 155 million dollars, which Contrast with your balance.
Following recent events, in which the company has recognized that its situation was hanging by a thread, the few remaining customers they have ended up leaving. Either Coinbase or Paxos Trust have stopped using their platform. The ‘crypto’ bank now only has to return all the money from the deposits and resolve the claims that it has pending, as it has explained.
Silvergate started operating 35 years ago and then had industrial clients and was dedicated to granting loans for commercial and residential real estate. But ten years ago, the company She turned to provide financial services to the ‘crypto’ industry. It housed the deposits of these companies and provided them with a payment gateway for fiat and cryptocurrencies.
His niche worked for a few years, benefiting from the rise of the industry and the furor of bitcoin highs. However, Silvergate was assuming a lot of risk by depositing all its resources in a volatile industry such as ‘crypto’ assets and, moreover, without any diversification. An approach that it has become evident when the adversities have arrived.
