Silvergate bank

[adaseb]

Been reading all the news reports and saw that the stock lost -60% today alone. Seems that more than half a dozen exchanges have stopped to do business with silvergate.

Basically they delayed some 10K filing and said that they might have issues continuing operations. Seems like the FTX contagion is continuing, when I assumed that the worst was done.

This was a big bank for crypto. I think I even wired some funds into the bank in the past.

What does everyone think will happen? Is it just FUD?

[EarnOnVictor]

Permit me to say that it's still the chain effect of the FTX that is affecting Silvergate, the bank tried to stabilize after the collapse of the exchange, but the present reality seems it's getting more difficult and insolvency is looming.

The bank held deposits for FTX units, and the panic withdrawal was another issue before the recent one in which about $8.1B was withdrawn even after the Wall Street Journal disclosed that 40% of their workforce was laid off as the bank spend half of its decade profits. This might indeed cause a further issue for it but certainly not much for the crypto space.

Source: Silvergate Issue

[stompix]

What does everyone think will happen? Is it just FUD?

If FUD is mentioned then for sure it's real!
Lately, I've seen this happening so many times that I know when bitcoiners scream FUD is as clear as the sky is blue.

So, we have a report from January they sold assets to cover an enormous 8.1 billion withdrawal, they have laid off 40% of their workforce, they have shelved their plans for a stablecoin at a loss with millions spent on developing and now they have asked for a delay in publishing their annual report and are asking another audit firm to do the job.
https://www.sec.gov/Archives/edgar/data/1312109/000110465923027353/tm238251d1_nt10k.htm

As reported in the press release furnished as Exhibit 99.1 to the Company’s Current Report on Form 8-K dated January 17, 2023 (the "Earnings Release"), the Company’s preliminary, unaudited financial results for the fourth quarter and full year ended December 31, 2022, included a net loss attributable to common shareholders for the year ended December 31, 2022 of $948.7 million compared to net income available to common shareholders of $75.5 million for the year ended December 31, 2021.
The Company sold additional debt securities in January and February 2023 and expects to record further losses related to the other-than-temporary impairment on the securities portfolio.
These additional losses will negatively impact the regulatory capital ratios of the Company and the Company's wholly owned subsidiary, Silvergate Bank (the "Bank"), and could result in the Company and the Bank being less than well-capitalized.

How do you call a bank that is less than well-capitalized?
FUD? No, a clear statement was received by the SEC of their estimated losses and further losses as well as the inability to produce a report!
95% loss currently in one year from the highest point.

[adaseb]

Yes but we already knew about their huge loss 3 months ago.

Why is there a huge -60% sell-off and why did half a dozen exchanges stop doing business with them. They would of stopped doing business 3 months ago. Something must of happened recently to drive them to do this.

The way the bank stands now, would you feel safe depositting funds into them? Probably not. If people don't deposit funds then how will the bank survive.

[coupable]

Yes but we already knew about their huge loss 3 months ago.

Why is there a huge -60% sell-off and why did half a dozen exchanges stop doing business with them. They would of stopped doing business 3 months ago. Something must of happened recently to drive them to do this.

The way the bank stands now, would you feel safe depositting funds into them? Probably not. If people don't deposit funds then how will the bank survive.

The bank was holding many assets owned by the famous platform FTX, and it was not originally expected that it would last so long after the collapse of the platform. It was announced earlier that the bank sold part of its assets to cover withdrawals at a very high value. The wave of withdrawals began after the bank disclosed that it had failed to submit the financial reports for the year 2022 and that it intended to change the company responsible for auditing. The widening of the difference between the amounts of withdrawals and deposits is what exacerbated the matter, as evidenced by the bank's inability to pay the dues of its customers and its necessity to sell its assets.

[Fortify]

Been reading all the news reports and saw that the stock lost -60% today alone. Seems that more than half a dozen exchanges have stopped to do business with silvergate.

Basically they delayed some 10K filing and said that they might have issues continuing operations. Seems like the FTX contagion is continuing, when I assumed that the worst was done.

This was a big bank for crypto. I think I even wired some funds into the bank in the past.

What does everyone think will happen? Is it just FUD?

It's crazy how fast such rumors can spread, even if there is no actual truth to them - if triggered at the time, echoed around the world by the right people and catching the market in the right state of nervousness they can become a self fulfilling prophecy. This could in theory happen to every single bank, but it seems to be specifically caused via their connection to fiat currency, which have been in the sights of cryto regulators lately and could be under the microscope. Even the most stable bank works on the basis that they take deposits in and lend based on those deposits, but don't necessary have the full amount of funds to cover all costs immediately if there is a bank run. It would seem to have crept in and had an effect on the Bitcoin price today with a little drop.

[Fivestar4everMVP]

Could this possibly be the reason why bitcoin suddenly turned from its bullish trend and started dropping in price?

Silvergate was indeed a big crypto bank, though I've never used them, but then, I can't really understand why the collapse of one company had to lead to the collapse of several others, this, to me shows that we still have a long way to go before crypto becomes fully adopted, until we arrive at a stage where every crypto company is independent of one another, that is, the collapse of one company shouldn't affect other companies, and should not take a major toll on the entire crypto market, until we are here, then and only then will confidence in crypto begin to grow massively and also aid rapid adoption worldwide.

[adaseb]

Silvergate was big because they had that Silvergate network between many crypto exchanges and it made it possible to wire money instantly even on weekends. It was very convenient because it kept arbitrage and hedges tight so the crypto coins and tokens had good liquidity when it was needed. If silvergate goes it'll make it difficult for market makers and arbitragers to keep prices constant between exchanges.

Anyone know how FDIC insurance works if say Coinbase keeps like $100M in an account on Silvergate? Last I heard FDIC only covers like $250K per account.

[lionheart78]

It was stated that the reason why the bank shares fell more than 55%  effect of the Silvergate announcement to SEC that it will not be able to file an annual report and the state of evaluating itself on the ability to stay on the market.[1]

This statement alarms its investors and depositors and is probably the reason why , the majority of Silvergate’s crypto clients, including Coinbase, Paxos, Galaxy Digital and Crypto.com, cut ties with the bank.  It looks like Silvergate will be announcing bankruptcy soon.

Could this possibly be the reason why bitcoin suddenly turned from its bullish trend and started dropping in price?

Silvergate was indeed a big crypto bank, though I've never used them, but then, I can't really understand why the collapse of one company had to lead to the collapse of several others, this, to me shows that we still have a long way to go before crypto becomes fully adopted, until we arrive at a stage where every crypto company is independent of one another, that is, the collapse of one company shouldn't affect other companies, and should not take a major toll on the entire crypto market, until we are here, then and only then will confidence in crypto begin to grow massively and also aid rapid adoption worldwide.

There is always a domino effect in the market which explains why some markets are affected indirectly.  But I do not think that this incident has something to do with Bitcoin price retracing.



https://edition.cnn.com/2023/03/02/business/silvergate-capital-crypto-ftx/index.html

[adaseb]

The CEO of BCB Group, which is some crypto payment service has just announced that he received notice that "Silvergate's SEN is suspended effective immediately". This happened about an hour ago. His twitter is @OliverBCB

I think if Silvergate can survive the weekend then they might recover from this. Some exchanges such as OK Coin said they will still use them. Not every exchange has left the bank. However this brings back memories of Lehman moment (or Bear Stearns). They basically got shut down on a Friday, and FDIC took over during the weekend and it was sold off to JPM (or some other bank) by Monday with people's deposits.

Going to be a VERY dicey week. Best not to trade with leverage.

[stompix]

Yes but we already knew about their huge loss 3 months ago.
Why is there a huge -60% sell-off and why did half a dozen exchanges stop doing business with them.

Because we knew in January about the liquidity crisis.
Right now, we have a signed document from them, sent to the SEC, the one I linked above which is dated March 1st which clearly says they can't provide the current annual report in due time and they have to reconsider if their current situation allows them to keep operating.

So again, no FUD, but facts! If your current bank would say they might not have enough funds to cover all assets, they're down 2/3 of their deposit and might be out of business would you keep your money with them, especially since your funds are not insured?

It's crazy how fast such rumors can spread, even if there is no actual truth to them

Denial is strong in this one! A signed document published by SEC is "rumors"?

I can't really understand why the collapse of one company had to lead to the collapse of several others, this, to me shows that we still have a long way to go before crypto becomes fully adopted, until we arrive at a stage where every crypto company is independent of one another, that is, the collapse of one company shouldn't affect other companies, and should not take a major toll on the entire crypto market until we are here, then and only then will confidence in crypto begin to grow massively and also aid rapid adoption worldwide.

Things will not change even with full adoption if the largest payment gateway between major crypto exchanges is going down and is facing bankruptcy the problems would still be there with or without mass adoption, the only difference might be in the amount we tumble for bad or worse. Just look around you and see how interconnected all economies are, how every commodity or asset varies based on market conditions, bitcoin will not be exempt from those in case something bad happens, it would be weirder if this wouldn't happen!

You need to understand that global adoption and institutional investors also come with disadvantages, we haven't invented in some magical assets that are immune to the market woes and last year should have proved to everyone that.

[o48o]

-cut-
What does everyone think will happen? Is it just FUD?

FUD is a scare-tactic, this is based on reality. If this was fud it would be highly organized fud as every platform out there just cut the ties to silvergate bank.
I am just hoping that stablecoins aren't affected by this. And i find it sort of funny that from the start of tether people have waited it to crash yet it seems to be all the other stablecoins that are in danger.

[raidarksword]

I thought we are already over with FTX and that would be last one, and now we have to deal again with Silvergate collapsed. Crypto and stock had been bad these days due to this collapsed, we never have a breather since the FTX collapsed too. FUD is still much on us and bear market is not yet over, we may have a hard time to get back in to a good momentum because of this. I hope we can recover it in due time.

[adaseb]

We will see how the stock performs tomorrow. It’s good news that it wasn’t seized over the weekend by the FDIC. However shutting down SEN doesn’t look good.

Currently kraken and Okcoin still use the bank but not with the SEN. Most likely there will be more concrete events coming out this week and maybe they will get some help somehow. However with no deposits coming in and SEN offline then I don’t see how they can make any profits.

[wajik-tempe]

Regarding the delay in the 10K filing, it is not uncommon for companies to experience delays in their financial reporting for various reasons. However, it is important for the company to provide clear and transparent communication to its stakeholders about the reasons for the delay and any potential impacts on the company's operations.
So i think based on this situation it is important to approach with caution and to gather as much information as possible before making any investment or business decisions related to Silvergate Capital Corporation.

[Dickiy]

Will bitcoin go down again when the Silvergate case brings fear to investors this March? and do we have to set up funds to buy bitcoin again?
Indirectly the effects of the fall of FTX are still continuing, and we do not know apart from Silvergate whether there are others that might exert price pressure on bitcoin to fall in 2023.
As one of the largest banks that always works with crypto projects, of course, if bankruptcy occurs, it will most likely be very difficult to find confidence in 2023 to get support from other banks.
This sustainability impact will probably increase our time to wait.

[adaseb]

Regarding the delay in the 10K filing, it is not uncommon for companies to experience delays in their financial reporting for various reasons. However, it is important for the company to provide clear and transparent communication to its stakeholders about the reasons for the delay and any potential impacts on the company's operations.
So i think based on this situation it is important to approach with caution and to gather as much information as possible before making any investment or business decisions related to Silvergate Capital Corporation.

Yes I don't think its only the delay which caused this.

What I find strange is why it dropped -60% in a day while being down over -80% for the year. And also within 24 hours most of the exchanges in the SEN decided to cut ties from the bank. Why did this all of a sudden?

I think the exchanges probably know something that we don't. Also SI is typically institutionally owned if you look at the %'s of holders. Since it went down so much, it was the institutions which were selling and they also must of known something was up.

Since the bank is still alive and stock price seems stable its a good sign.

[el kaka22]

Bankruptcy is not really a "bad" thing, I mean as in it is not a shady thing that people do to screw others over. They are not stealing anyone's money, they were a bank and they managed the bank badly and now they are bankrupting, given the chance they wouldn't want to do this neither but they had to and this is the result.

All in all I am guessing that there is a chance we could end up with a bad result when the time comes, and that would not be an easy thing to handle neither, because it will cause a lot of exchanges to hurt a lot by losing all that money as well, this is the world we live in, it is always risky and we need to learn to live with it.

[coolcoinz]

We will see how the stock performs tomorrow. It’s good news that it wasn’t seized over the weekend by the FDIC. However shutting down SEN doesn’t look good.

Currently kraken and Okcoin still use the bank but not with the SEN. Most likely there will be more concrete events coming out this week and maybe they will get some help somehow. However with no deposits coming in and SEN offline then I don’t see how they can make any profits.

IMO they're going to be bankrupt, unless someone throws a lot of cash their way.
Should we care? I sure don't. If someone was doing deals with Sam the Fraud it's on them. The only downside is Silvergate was legit. They weren't scamming people like Sam did, they weren't putting people's money at risk, but they were dealing with shady clients, because someone whose director of trading is his former girlfriend, who also is a stoner, is not the guy you want to lend money to.
The team that manages risk at Silvergate did the biggest mistake of their careers and we're watching the aftermath of their decisions.

[Hydrogen]

Been reading all the news reports and saw that the stock lost -60% today alone. Seems that more than half a dozen exchanges have stopped to do business with silvergate.

-60% is a smaller decline in contrast to many major banks during the 2008 economic crisis. There was a bank stock I remember seeing that went from $5.00 down to $0.03. Then after the bank bailout was announced within a few weeks that $0.03 went up to 3.00 for around 100x gains.

I'm not certain what percentage of crypto banking services silvergate provided or what their exposure to the crypto market was in millions / billions. I think those could be the critical factors moving forward. Finance gurus typically use terms like "house of cards" and "fallling domino effect" to describe worst case scenarios associated with bubbles and big crashes.

Hopefully the crypto industry is decentralized across enough nations and separately banking providers to be effectively insulated from FTX and silvergate asset contagion. Being a global industry is one thing crypto has in its favor.