Silvergate Capital Shutdown Sparks Crypto Stocks Slide

Crypto operators’ stocks slumped in premarket US trading on Thursday after the struggling Silvergate Capital Corp revealed plans to wind down and go into voluntarily liquidation

Silvergate’s move adds to a list of high-profile collapses among crypto market players since last year and is another blow for the sector which is still reeling from the implosion of FTX.

Silvergate’s shares halved in value to $2.44, a day after hitting a record low and have lost 64% since March 1 when the company flagged a going concern risk.

Analysts said a complete closure of the crypto lender could take one or two years depending on how quickly outstanding loans are repaid and assets are disposed of.

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“We believe this decision was made, at least in part, to help mitigate Silvergate Bank’s legal liability related to FTX’s bankruptcy,” Wedbush analysts wrote in a note.

Silvergate did not immediately respond to a request for comment on the analysts’ view.

Meanwhile, shorting in the shares of Silvergate has proved profitable for bearish investors as its shares have lost 95% of their value in the past 12 months and 72% so far this year.

Nearly 85% of the company’s free float is under short position with short sellers making $241 million in year-to-date mark-to-market profit, according to analytics firm S3 Partners.

Shares of Signature Bank, which uses blockchain technology, fell 9%. Crypto exchange Coinbase Global, which cut ties with the bank last week, dropped 4%. Miners Riot Blockchain and Marathon Digital slid 3.7% each.

Bitcoin steadied at $21,608, near its lowest level since mid-February, with analysts and investors saying the market impact of the news was limited as it was widely expected.

Reuters with additional editing by Sean O’Meara

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.