Silvergate Capital Corp, a bank affiliated with the now-defunct FTX, is under significant pressure as investors are rapidly pulling out their deposits. The bank has been hit so hard that it has had to take a $4.3 billion loan from the Federal Home Loan Bank of San Francisco to stave off bankruptcy. Silvergate is one of the many organizations suffering from the recent crypto exchange market crash and is likely not the last.
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Trouble for the financial institution began late last year shortly after FTX’s collapse. In a matter of weeks, investors had withdrawn investments amounting to nearly 70% of total deposits in the bank. This, in turn, led to an about 50% drop in the bank’s stock price, almost crippling the bank.
The bank has resorted to borrowing billions from the Federal Home Loan Bank of San Francisco, which is typically a last resort for firms facing bankruptcy. Reports indicate that prior to this borrowing, the California-based bank had recently sold $5.2 billion worth of debt securities despite incurring a loss of $300 million.
Despite the current troubles, Silvergate has had a successful history. The bank got its first big break in the decentralized finance (Defi) space when it launched the Silvergate Exchange Network (SEN), allowing exchanges like FTX and Uniswap to transfer US dollars.
When Bitcoin and other cryptocurrencies peaked last year, Silvergate also saw significant gains. From 2019 to 2021, the bank recorded an 800% increase in deposits, growing from just over a billion dollars to over $14.3 billion.
It’s uncertain what the future holds for Silvergate in the wake of the recent market crash. However, the bank has proven to be a solid institution. Weathering such significant losses in such a short period without declaring bankruptcy is a remarkable achievement as shown in recent tweets.
While the market downturn is challenging for Silvergate, it’s also worth noting that the bank has been relatively successful in comparison to some of its peers. It is still in operation, and recent news about the bank shows it is taking steps to address the issues that resulted from the recent market downturn.
It is important to note that the information provided in this article is not intended as financial advice. If you have any business with Silvergate Capital Corp, it is strongly recommended that you consult a qualified financial advisor for personalized and professional guidance.
