Market-making firm Citadel Securities, owned by Ken Griffin, recently made a big bet on crypto-friendly Silvergate Bank, worth $25 million, according to a filed released by the Securities Exchange Commission (SEC) on February 14.
According to SEC filings, the market-making hedge fund reported a 5.5% stake in Silvergate for $0.01 per share for a total of 1.6 million shares.
Share Silvergate get your Valentine
Valentine’s Day has arrived for Silvergate, a crypto-friendly bank suffering from a turbulent event in 2022 after the crypto exchange FTX debacle that caused a crisis in financial institutions.
Shares of Silvergate surged 17% following the announcement of the Citadel purchase. This reflects a healthy recovery in the crypto lender’s stock following the bankruptcy of FTX, one of Silvergate Capital’s clients.
In addition, Susquehanna Advisors Group took a 7.5% stake in Silvergate. Susquehanna now owns 2.36 million shares of the crypto credit bank worth $35 million.
In addition, asset manager BlackRock has announced its holdings in crypto-friendly banks in a filed with the SEC. In January 2023, the purchase of BlackRock shares in Silvergate represented a 7.2% stake in the company, which means 2,285 shares owned by Blackrock.
BlackRock, Citadel, and other major institutions have doubled down on the crypto industry despite the continued downward trend in the sector. Increasing regulatory pressure has failed to deter major institutions from jumping into new asset classes.
The current investment by Citadel in Silvergate demonstrates the long-term value proposition for crypto and its growing role in global financial markets.
Bank shares opened the day on the Nasdaq Index trading at $14.30 per share, and after Citadel’s announcement, the trading day closed at $17 per share.
After reporting a drop in total deposits by investors from $11.9 billion in September 2021 to $3.8 billion in the fourth quarter of 2022, according to the earnings call from Chief Executive Officer Alan Lane, today’s announcement could mean a return to normal for financial institutions. .
In addition, the crypto lender reported a net loss of $1 billion in the fourth quarter of 2022; after the bankruptcy of FTX which caused uncertainty for investors, the bank reported a withdrawal of more than $ 8 billion by the end of 2022.
Furthermore, in Silvergate’s last earnings call, Alan Lane reported a 40% reduction in headcount, or 200 employees, to keep costs under control after the reported cash burn in Q4 2022.
Despite the recent plunge in crypto-friendly bank stocks, financial institutions and the sector preserve their long-term bullish potential. With the inflation rate falling, institutional investors in Bitcoin and other digital assets can increase interest which can benefit banks and the crypto market.
Featured Image from Unsplash, chart from Tradingview.