Crypto Bank Silvergate Capital May Be In A Crisis• March 4, 2023 11:11 am • Comments
Crypto.com and multiple other crypto firms have just decided to discontinue their operations with Silvergate Bank which is a bank that was heavily affected by the FTX fallout last year.
It was reported that the bank had lost around $1 billion in the last quarter of last year and had failed to file a financial report.
Many investors and speculators are suspecting that the bank may be in trouble due to all of these red flags as it is rare for crypto firms to ban a traditional financial institution.
As a result, Crypto.com has essentially suspended all USD deposits and withdrawals related to Silvergate bank and it may be likely that other exchanges will soon follow suit.
The fact that this is happening is a real indicator that there are now some ties between crypto and the traditional financial system.
Some may see this as a negative aspect due to crypto’s volatile nature, but it does indicate that the sector is now maturing to a point where it could be considered “mainstream”.
Silvergate (the bank of bitcoin) down 97%.
Is it going to zero? 👇 pic.twitter.com/AypsD10dZL
— Genevieve Roch-Decter, CFA (@GRDecter) March 3, 2023
The laundry list of customers helps to explain why Silvergate’s woes are frightening. Very few banks will touch crypto because it’s so risky — and most traditional banks don’t let crypto clients transact in dollars 24/7. Access to banking that moves at the pace crypto does is rare, and only one other US bank can do it.
“If Silvergate goes out of business, it’s going to push funds and market makers further offshore,” Ava Labs president John Wu told Barron’s.
The issue is how easy it is to get into actual cash dollars, which in finance-speak is called liquidity. Less liquidity makes transactions more difficult. Already there is a broader gap between the price at which a trade is expected to go through at and the actual price at which it executes, Wu said.
So Silvergate’s troubles are a problem for the entire crypto industry.
As a result of the news, it was recorded that the crypto markets reacted negatively which temporarily halted the bull rally that the industry had been experiencing for the past month.
So far, the market cap of crypto had went below $1.025 trillion again and it is unclear if this is the start of a new bear trend or just a temporary retracement.
Silvergate does have a lot of impact given the fact that it provides financial infrastructure services to the largest crypto exchanges in the world.
The company reporting losses may cause investors and crypto firms doing a “bank run” that could lead to the bank’s bankruptcy.
JUST IN: Michael Saylor's MicroStrategy claims $205M #Bitcoin -backed loan from Silvergate has not been affected by bank's latest issues 👀 👍 pic.twitter.com/8SdqJYxgaX
— Bitcoin News ⚡ (@BitcoinNewsCom) March 2, 2023
Apart from a brief moment on March 2 when Bitcoin’s price traded down to $22,000, the demand for bullish call options has exceeded the neutral-to-bearish puts since Feb. 25.
Moreover, the current 0.71 put-to-call volume ratio shows that the Bitcoin options market is more strongly populated by neutral-to-bullish strategies that favor call (buy) options.
From a derivatives market perspective, the market showed resilience, so Bitcoin traders may not expect additional corrections despite the bearish indicator from the failed ascending channel.
The 4% weekly decline in total market capitalization reflects the uncertainty brought by Silvergate Bank, and it is unlikely to have roots deep enough to cause systemic risk.
Silvergate Capital, the crypto bank with huge exposure to FTX, just gave the worst earning news possible:
They're delaying their annual report because the financials and internal controls of the company may not be reliable
The stock is down 30% after hours
— Genevieve Roch-Decter, CFA (@GRDecter) March 1, 2023
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