Silvergate Plunged 27% Following Crypto Crisis Sparked By FTX Collapse

• Silvergate (SI) retraced on a 27% rally following a preliminary quarter result due to a steep decline in customer withdrawals.
• The crypto exchange FTX filing for bankruptcy protection sparked a “confidence crisis across the digital asset ecosystem” that adversely impacted Silvergate’s shares.
• Silvergate saw a decline in customer funds by above $8.1 billion and liquidated $5.2 billion in digital assets for a $718 million loss.

Crypto-friendly financial institution Silvergate (SI) experienced a steep decline in their share price today following a preliminary quarter result that revealed a significant drop in customer withdrawals. This downturn in Silvergate’s performance can be directly linked to the collapse of the crypto exchange FTX, which in late 2022 filed for bankruptcy protection. The news of FTX’s bankruptcy sparked a “confidence crisis across the digital asset ecosystem”, resulting in a significant decrease in customer confidence in crypto-related companies, including Silvergate.

At the end of the third quarter of 2022, the bank had registered $11.9 billion in customer deposits. However, this number has since dropped to $3.8 billion, representing a 68% decrease from its 2022 high. In an effort to offset this loss of funds, Silvergate was forced to liquidate $5.2 billion in digital assets for a $718 million loss. In addition, the financial institution had to implement cost cutting measures, including layoffs and the suspension of dividend payments.

The ripple effect of the FTX bankruptcy has had a profound effect on the crypto industry, and Silvergate has been one of the most impacted of all crypto-related companies. While the financial institution is working to rebuild its customer base and regain the public’s confidence, the situation is still uncertain. However, if Silvergate is able to weather the storm and regain its former level of success, it may yet emerge as a leader in the crypto industry.