After the collapse of the FTX cryptocurrency exchange, the crypto market continues to struggle. Silvergate Capital, a crypto bank, seems to be the latest victim.
The stock of the crypto bank has dropped significantly in the wake the FTX meltdown. However, traders expect recent developments to have a significant impact on it.
FTX Collapse Continues To Rattle Markets
Silvergate Capital shares fell sharply on Friday, a sign of the FTX crash continuing to spook investors. Since the first news about the FTX problems broke, the stock is down 47%. Silvergate’s exposure at FTX led to the stock price collapse.
The bank previously stated that it was only exposed to deposits. An analyst from Goldman Sachs wrote that they could not confirm Silvergate’s exposures to FTX and any of its associated entities. Silvergate stated that FTX deposits with Silvergate accounted to 10% of $11.9 billion in total deposits by digital asset customers.
However, crypto stocks like Coinbase (COIN), MicroStrategy(MSTR), and Marathon Digital [MAR] made some gains, with Nasdaq Composite up more than 2%.
Silvegate CEO tries to calm fears
Silvergate CEO Alan Lane stated that in a statement to calm jittery customers and investors,

“In light recent developments, I want you to know what Silvergate’s exposure is to FTX. Silvergate had $11.9 billion in total deposits from all digital assets customers as of September 30, 2022. FTX was less than 10%. Silvergate has no outstanding loans to, nor investments, in FTX, and FTX is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans. Our relationship with FTX is strictly limited to deposits.

The CEO stressed that all SEN leverage loans were secured by Bitcoin and that Silvergate cannot be used as collateral for these loans.

“Silvergate’s platform was designed to support our clients in times of market volatility or transformation. The SEN has continued to function as intended and without interruption. We are a federally regulated bank institution with a strong balance sheet and ample liquidity to meet our customers’ needs.

The FTX Exposure
Silvergate was a client for FTX, which caused investors to be concerned about deposit outflows from FTX as well as credit exposure through SEN leverage. Silvergate provided an update on November 16th, stating that its total deposits had declined from $12 billion to $9.8billion, with $1.2billion of deposits from FTX.
Deposit Outflows A Concern But Bank Run Unlikely
The deposit side remains the biggest concern, with Silvergate having $900million of other outflows. Other exchanges have also had problems, which could be troubling institutional traders since the FTX scandal has shaken investors’ faith in the industry.
Although the FTX crash is a concern, a bank ran for Silvergate is not unlikely. The crypto bank will continue to see deposits outflow in the short term. Mark Cahodes, an early critic of FTX, stated that FTX’s Silvergate deposit still makes up a large portion of the crypto bank’s deposits. He also stated that he would short Silvergate.
Disclaimer: This article is intended for informational purposes only. This article is not intended to be used for legal, tax, investment or financial advice.

  

After the collapse of the FTX cryptocurrency exchange, the crypto market continues to struggle. Silvergate Capital, a crypto bank, is the latest victim. As traders anticipate that recent developments could have a significant impact on the stock, the crypto bank has seen a significant decline in its stock. FTX Collapse Continues to Rattle Markets. The significant drop in shares of crypto bank Silvergate Capital on Friday is a sign that investors continue to be scared by the FTX collapse. Since the first news about the FTX problems broke, the stock is down 47%. Silvergate’s exposure at FTX was responsible for the collapse in the share prices. The bank previously stated that it was only exposed to deposits. An analyst from Goldman Sachs wrote that it couldn’t confirm Silvergate’s exposures to FTX and any of its associated entities. Silvergate stated that FTX deposits with Silvergate accounted to 10% of $11.9 billion in total deposits by digital asset customers. However, crypto stocks like Coinbase (COIN), MicroStrategy(MSTR) and Marathon Digital (MAR), made some gains with the Nasdaq Composite rising over 2%. Silvergate CEO Alan Lane tries to calm jittery customers and investors in a statement.
“In light recent developments, I want you to know what Silvergate’s exposure is to FTX. Silvergate had $11.9 billion in total deposits from all digital assets customers as of September 30, 2022. FTX was less than 10%. Silvergate has no outstanding loans to, nor investments, in FTX, and FTX is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans. Our relationship with FTX is strictly limited to deposits.
The CEO stressed that all SEN leverage loans were secured by Bitcoin and that Silvergate cannot be used as collateral for these loans.
“Silvergate’s platform was designed to support our clients in times of market volatility or transformation. The SEN has continued to function as intended and without interruption. We are a federally regulated bank institution with a strong balance sheet and ample liquidity to meet our customers’ needs.
Silvergate’s client, the FTX Exposure FTX, raised concerns about deposit outflows from FTX as well as credit exposure through SEN leverage. Silvergate provided an update on November 16th, stating that its total deposits had declined from $12 billion to $9.8billion, with $1.2billion of deposits from FTX. There is a concern about deposit outflows, but a bank run is unlikely. Silvergate has $900 million in other deposit outflows. There have been issues with other exchanges which may be able to spook institutional trader since the FTX debacle. However, the main concern remains on the deposit side, with Silvergate having $900 million of other deposit outflows. The crypto bank will continue to see deposits outflows in the short term. Mark Cahodes, an early critic of FTX, stated that FTX’s Silvergate deposit still makes up a large portion of the crypto bank’s deposits. He had also stated that he plans to short Silvergate.Disclaimer: This article is provided for informational purposes only. This article is not intended to be used for legal, tax, financial, or any other advice.