It feels like yesterday I was talking about how every few days sees the downfall of another entity related to crypto. Silvergate Bank is the latest casualty of the crypto wars of the early 2020’s, its reputation for supporting some very large names in the crypto industry has been destroyed after it more or less lost its crypto services due to insolvency. Let’s look at some of the basics of Silvergate.
Silvergate Bank was actually one of the first banks to offer 24/7 crypto settlement services in the commercial space which was ideal for crypto because it never sleeps. It operates every minute of every day and the charts never stop.
So here is where the rabbit hole deepens. Prior to FTX’s collapse, the bank held $16 billion in deposits with over 75% of that being crypto related. Silvergate was not doing anything shady (think hedge funds making obscene bets and not properly backing loans with assets) BUT… there were huge concerns over FTX’s financial stability which led to massive customer withdrawals in the end of 2022.
To pay what they owed… Silvergate had to liquidite its investments and pay depositors their money which resulted in a $1 billion loss. To make it even worse, it looks like Silvergate is being investigated by bank regulators and the DOJ. I don’t generally think of the DOJ as an entity that ‘f’s around’. This could be bad new. It gets worse… their stock is down over 90% and closing up their crypto services could be enough to sink them completely.
So what does it all mean?
Every crypto entity that was using Silvergate is now going to have to find another onramp/offramp for their digital assets. There are some big names on this list… Coinbase, Paxos, Gemini, Crypto.com and many more. The only name I have heard as a possible replacement is Signature Bank which, admittedly, I know nothing of.
Does this all add up to some sort of conspiracy theory as suggested in my previous article? No. It could just be another bad, misbehaving business. I can’t prove it one way or the other but I can admit I am tired of seeing it happen. There is no accountability in the world and this is just another example of it.
Which bank, crypto exchange, fund etc will go under next??
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