The Fud Silvergate is gaining momentum. Yesterday, several companies in the crypto sphere announced their separation from fintech. In the aftermath, its share price fell more than 50% in the space of 24 hours.
The ravages of the bear market continue to impact crypto and industry-related businesses. The recent victim could be the Californian pro crypto fintech, Silvergate Bank. The latter saw its share price plunge more than 50% in Thursday’s session. In six months, the share value has already fallen by more than 90%.
Silvergate, the next domino to fall
This sudden drop in Silvergate stock, as BeInCrypto explained in a previous article, is linked to the postponement of its annual report. Investors are worried about the viability of the crypto bank, which previously claimed to have lost nearly $1 billion in the fourth quarter. Moreover, many hedge funds were already preparing to “short” the title of the fintech.
In fact, the source of Silvergate’s problem has to do with its business model, which consists of collecting cash deposits from exchanges or other crypto companies to place them in more stable investments.
With the crypto winter, more specifically during the period of the FTX scandal, many users sought to withdraw their holdings from the exchanges. The latter had no choice but to withdraw their funds from Silvergate in order to meet the demands of their customers. This situation must have exposed the Californian bank to a liquidity crisis.
That said, it’s not just about liquidity issues; Silvergate is suspected of having had little Catholic relations with FTX and Alemada Research, the investment branch of the Exchange.
Indeed, the company is accused of having been an accomplice in the assembly of the Ponzi system of Sam Bankman-Fried. Besides, the company is under investigation into this story. Silvergate even reported this week that its activities could be affected by: “Various disputes (including private disputes) and investigations and regulatory and other investigations”. Given the scandal surrounding Silvergate, many companies in the cryptocurrency universe have announced their separation from crypto bank.
Coinbase was the first to cut ties with bridges with fintech. The American Exchange reported on Twitter that its decision was made “in light of recent events [and] as a precaution.” The crypto sphere distances itself from Circle, the USDC stablecoin transmitter, said: that it is in the process of resolving certain services with [Silvergate] and informing customers.
Circle, the issuer of the USDC stablecoin, said it is in the process of untying some services with [Silvergate] and informing customers.
Tether, Circle’s biggest competitor, has also suspended payments through Silvergate. The USDT issuer clarified that it has no exposure to the crypto bank.
Mike Novogratz’s management fund also broke fintech ties; now, Galaxy Digital will not accept any transfers through Silvergate. Crypto.com and Paxos have also distanced themselves from the Californian bank.
Moral of the story: While some may trumpet that cryptocurrencies left the bear market behind, reality shows us that its effects continue to plague the industry.
