On Thursday, a number of cryptocurrency companies issued statements meant to alienate themselves from the crypto-friendly bank Silvergate Capital; whose shares have experienced a precipitous decline after the company announced it would delay the publication of its annual report and could report additional losses.

Silvergate On The Verge Of Collapse?

As reported earlier on CoinGape, United States’ largest crypto trading platform Coinbase Global Inc., announced that it had cut ties with Silvergate amid ongoing regulatory problems in the bank. This was followed by stablecoin issuer Paxos Trust Co. LLC, which made a similar announcement of severing connections with the bank.

Read More: Check Out The Top 10 DeFi Lending Platforms Of 2023

And, not just Coinbase or Paxos, but major institutions such as Galaxy Digital, Gemini, and BitStamp have each published statements claiming that they have severed links with the once crucial partner linking them to the conventional banking system. Prior to the delayed annual report being released, Silvergate stated that it would be “evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements.”

After the revelation, early morning trading saw a fall of over 50% in the price of Silvergate Bank stock at $6.52. Additionally, crypto giant Coinbase also took a hit and dropped by 8% resulting in $59.47 per share.

Silvergate’s Fall From Grace

Four months later, the negative influence that FTX had on the cryptocurrency sector is still being felt across the industry, as companies of all sizes are feeling the strain of the general market as well as the pain of being associated with Sam Bankman-Fried’s failed crypto empire. In 2018, Silvergate drew business from Alameda Research, the trading arm of FTX even before the crypto exchange was introduced.

However, following the FTX collapse in November 2022, Silvergate witnessed a major bank run, as evidenced by the fact that customers withdrew more than $8 billion from the bank during the fourth quarter alone. On January 5, 2023, Silvergate laid off 40% of its workforce and even obtained several loans — one of which being a loan of $4.3 billion from the Federal Home Loan Bank. Silvergate entered a state of crisis, postponing plans to launch a digital currency and writing off $196 million connected to its acquisition of the assets linked to Facebook’s failed project Diem.

Industry experts and market participants are of the opinion that, Silvergate could soon follow FTX’s footsteps to file for bankruptcy after the March 16 deadline. Silvergate is currently among the most shorted firms on the market as a result of the ongoing investigations and the recent termination of partnerships. The Financial Industry Regulatory Authority reported that as of January end, the total short positions comprised more than 72% of the Silvergate Capital stock.

Also Read: Coinbase CEO Brian Armstrong Takes Jab At U.S. SEC, Asserts “Staking” Is Not A Security

The post As Crypto Industry Distances Itself From Silvergate, Will It Follow The Footsteps Of FTX? appeared first on CoinGape.

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Filed under: News - @ March 2, 2023 7:07 pm