Bitcoin slides on Silvergate fallout
Digital asset's slump continues as crypto bank announces shutdown after $1B loss and FTX bankruptcy
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Payne Capital Management President Ryan Payne shares his outlook on stocks and bonds, as well as the state of the crypto industry following Federal Reserve Chairman Powell's testimony before Congress.
Bitcoin and ethereum are trading lower following Wednesday's announcement by Silvergate Capital that it will wind down operations and voluntarily liquidate Silvergate Bank.
"There has been some level of price action since Silvergate’s liquidation announcement, but key industry-wide metrics like spot trading volume, futures open interest (OI), and DeFi total value locked (TVL) have not moved much," said Zhong Yang Chan, Head of Research at CoinGecko. "Generally, markets have been subdued while awaiting further inflation rate data."
Chan told FOX Business that CoinGecko, the world's largest independent cryptocurrency aggregator, doesn't expect contagion effects as most of their clients would likely have switched to other banks, or have alternatives lined up.
BITCOIN HITS TWO WEEK LOW, SILVERGATE UNRAVELS
Last week, Silvergate began expressing doubts about its ability to stay in business following a reported $1 billion loss in the fourth quarter and a delayed annual report to the Securities and Exchange Commission.
Average digital asset customer deposits were $7.3 billion during the fourth quarter of 2022, compared to $12.0 billion during the third quarter of 2022
SILVERGATE CAPITAL WINDING DOWN BUSINESS; WILL VOLUNTARILY LIQUIDATE
Silvergate Capital Corp
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SI | SILVERGATE CAPITAL | 1.34 | +0.13 | +10.74% |
WHITE HOUSE WATCHING SILVERGATE IN CRYPTO FALLOUT
Timeline to Silvergate liquidation
On Jan 5, Silvergate cut 200 jobs and said total deposits from digital asset customers declined to $3.8 billion at the end of Dec. 31, 2022, compared with $11.9 billion on Sept. 30, 2022.
On Jan 27, the crypto bank suspended dividend payouts on some of its preferred stock to preserve capital, and on Jan. 31, U.S. senators asked Silvergate to detail its risk management practices and dealings with bankrupt exchange FTX.
FTX founder Sam Bankman-Fried, center, is escorted from a Corrections Department van as he arrives at the Magistrate Court building for a hearing, in Nassau, Bahamas,, Dec. 21, 2022. (AP Photo/Rebecca Blackwell / AP Newsroom)
On Feb. 2, federal prosecutors in Washington began probing into the bank and its dealings with bankrupt crypto exchange FTX and Alameda Research. Coinbase Global Inc and Galaxy Digital dropped Silvergate as their banking partner one month later.
Silvergate Capital was founded in 1988 and began dabbling in cryptocurrencies in 2013 until converting most of its transactions to digital assets in recent years.
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Reuters contributed to this report