Shares of Silvergate Capital, the holding company for Silvergate Bank, fell nearly 50% during Thursday’s session after the bank’s cryptocurrency-focused parent company, which has mostly corporate clients, reported preliminary fourth-quarter results.
The main alarm signal was the recovery of assets held by the financial institution, which revealed bloodshed.
Total deposits protected by Silvergate fell from $11.9 billion at the end of the third quarter to $3.8 billion in December, down 68%. As explained by Silvergate itself, this phenomenon is caused by a “crisis of confidence in the entire ecosystem”, but in the case of the holding company of the well-known “crypto bank”, since FTX was one of the cryptocurrency platforms that was a customer of Silvergate Bank.
To protect its treasury position, the company ended up selling debt securities and derivative products, causing it to record a loss of US$718 million.
“In response to rapid changes in the cryptocurrency ecosystem during the fourth quarter, we took proportionate steps to secure cash to cover potential redemptions,” Silvergate Capital CEO Alan Lane explained in a statement.
Silvergate Bank Holdings also reported that it will lay off 200 workers, or 40% of the workforce.
The news led the stocks to fall by 49.25%, but they are “comfortable” for their decline by 42.86% at the close of Thursday’s session, erasing the “rise” of the night in which the stocks rose by 27, 10%.
Silvergate Capital went public in 2019, after each share reached $222 in November 2021, the same month that the market capitalization of bitcoin and cryptocurrency smashed to all-time highs.
However, in the meantime, since then, Silvergate shares have already fallen 90%, after closing Thursday at $12.57 a share.