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- 1 Silvergate’s Q4 results are really affected by last year’s crypto crisis.
- 2 The stock price of Silvergate also tumbled more than 88% in the previous year.
According to a Bloomberg report, Silvergate Capital Corp. (NYSE:SI) recently noted that it needs more time to assess the extent of damage to its finances caused from last year’s crypto downfall.
The Aftereffect of last year’s crypto crisis on Silvergate
Silvergate Capital is a holding company headquartered in La Jolla, California. The company engages in the provision of banking and loan services. While aims the financial infrastructure solutions and services for participants in the nascent and digital currency industry.
Silvergate already reported a $1 Billion loss for the fourth quarter while the bank added the figure could climb higher. “The crypto-focused bank is still working on tallying the cost of rapidly selling assets to repay advances from the Federal Home Loan Bank System. Meanwhile, it may need to note the value of some remaining holdings,” according to Yahoo Finance.
The company said in a regulatory filing that the loss “could result in being less than well-capitalized. While the company is evaluating the impact that these subsequent events have on its ability to continue as a going concern.”
There was a time when Silvergate excited its shareholders by soaking up cash deposits from crypto ventures to invest in more staid securities. But after the collapse of one of the biggest crypto exchanges in the world, FTX, the customers of Silvergate initiated their withdrawals.
Todd Baker, a senior fellow at Columbia University’s Richman Center for Business, Law and Public Policy said that “It confirms the fears that many regulators have had. If this bank fails, it’s going to be held up as an example of why banks should be extremely conservative in dealing with crypto companies.”
Baker further said if this doesn’t happen, then the bank’s travails will stoke massive caution on regulators’ doings.
Although, Silvergate deeply analyzed the United State policy debate when it revealed in early January how it was stabilizing its balance sheet after selling billions in assets to pay depositors.
By the end of 2022, Silverbank held $4.3 billion in short-term Federal Home Loan Bank advances. It is a program that was originally set-up under President Herbert Hoover to bolster mortgage lending.
Recently, Silvergate said that it sold more securities in January and February to pay-off those advances, potentially exacerbating its losses.
On the other hand, the Federal Home Loan Bank of San Francisco also said in a statement that “all advances were at all times fully collateralized while they were outstanding.”
According to a recent update by the Wall Street Journal, the shares of Silvergate Capital “tumbled 30% premarket as the bank warned it risked being “less than well-capitalized”. The crypto-focused bank also said it was evaluating its ability to continue as a going concern.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
