According to a report from The Street, bank-friendly crypto Silvergate (SI) retraced in a massive 27% rally after early quarter results. Financial institutions recorded a drastic drop in customer withdrawals.
As a result, Silvergate shares fell more than 40% during today’s trading session. A representative of the financial institution stated that there is a “crisis of confidence in the ecosystem of digital assets” after the collapse of the crypto exchange FTX.
Crisis of Confidence in Crypto Makes Silvergate Troubled
Once the world’s second largest crypto trading platform, FTX filed for bankruptcy protection at the end of 2022. The trading platform and its executives allegedly mixed customer assets with its trading arm, Alameda Research.
The event has spread to a new industry as people’s trust in crypto companies has decreased. Silvergate suffered the consequences. Financial institutions experienced a decrease in customer funds of more than $8.1 billion.
At the end of the third quarter of 2022, the bank registered customer deposits of $11.9 billion. Silvergate has about $3.8 billion now, representing a 68% decline from its 2022 high.
As a result, financial institutions were forced to liquidate $5.2 billion in digital assets for a loss of $718 million. In addition, the bank cut about 40% of its staff to raise cash and liquidity. The financial company had total cash of $4.6 billion at the end of December 2022.
Alan Lane, CEO at Silvergate, commented on the bank’s situation:
In response to the rapid changes in the digital asset industry during the fourth quarter, we took appropriate measures to ensure that we maintain cash liquidity to meet potential deposit outflows, and we currently maintain a cash position in excess of the related digital assets. deposit.
No New Plans For Silvergate?
A separate report from the Wall Street Journal claims that Silvergate was forced to cut down on its operations. In addition to selling digital assets, the company is selling “many of its traditional banking operations and branches.”
Financial institutions will focus on providing services to crypto companies and crypto trading venues. This operation includes more than 90 & bank deposits.
Furthermore, the company pulled the plug on launching cryptocurrency. Silvergate bought the technology used by Facebook to develop its token, Libra. This digital asset has seen huge opposition from politicians and regulators around the world.
This opposition forced Facebook to cancel the project. Now, Silvergate will follow these steps for a loss of $196 million. Despite the recent events, the bank remains optimistic about the new industry. A representative told the WSJ:
While Silvergate has taken significant steps to navigate its current environment, its mission has not changed. Silvergate believes in the digital asset industry.