Silvergate Bank Remains Doubtful About its Future, Says Analyst

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Silvergate Bank Remains Doubtful About its Future, Says Analyst

DeFi Surfer, the crypto and financial markets content creator, published a blog, inviting the readers’ attention to the journey of the leading crypto trading financial institution Silvergate Bank, featuring its “fall from grace”. Though the bank stood at its peak in 2021, the company is currently at risk, suspicious of its future trade.

Notably, DeFi Surfer commented that subsequent to Silvergate’s IPO of 2019, the bank started exhibiting substantial growth in its deposits, stating:

Following Silvergate’s 2019 IPO, the bank’s deposits grew from $2 billion to $14 billion – 7x! – and the bank’s stock price increased an astounding 1600%, running from $13 to $220 per share.

However, after manifesting the highest point of its success, Silvergate Bank started declining, currently, its stock reaching as down as $5, almost by 97%, exhibiting “a rapid fall from grace”.

Significantly, DeFi Surfer mentioned that during the crypto upcycle, Silvargate’s performance was comparatively satisfactory as it perfectly suited into the category of a “bank with a rapidly growing and cheap deposit base” which is considered to be “extremely valuable”.

While analyzing the real cause of Silvergate’s downfall, the content creator explained that the bank has fallen victim to the growth in interest rates, marking a loss of over $1 billion by the end of the third quarter of 2022. DeFi Surfer said:

As Silvergate’s balance sheet rapidly grew during the crypto bull market, the company acquired billions in long-duration municipal bonds and mortgage-backed securities (MBS). Unfortunately for Silvergate, interest rates increased rapidly throughout 2022, significantly reducing the value of Silvergate’s securities portfolio.

In addition, Silvergate was forced to sell off $6 billion of its securities, losing almost $900 million of securities, “wiping out 70% of Silvergate’s common equity in the process.”

Interestingly, DeFi Surfer also delved into the case of Silvergate’s crypto banking peer Signature Bank, analyzing whether the latter would be the “next shoe to drop” in the crypto market.


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