On Thursday, shares of Silvergate Capital have been hit hard and are currently on a steady decline of nearly 50%. This comes after the crypto-focused bank revealed its preliminary results for the final quarter which showed a large number of crypto withdrawals. The total deposits made by clients of digital assets fell to nearly $3.8 billion by the end of the fourth quarter in 2022; representing a fall of almost 68% from its previous closing figure of $11.9 billion.
Silvergate Stock Price Crashes
The withdrawals took place at the same time the cryptocurrency exchange FTX, one of Silvergate’s clients, shut down in the midst of a crisis, which raised concerns regarding the reliability of the digital asset business. According to Silvergate, there is currently a “crisis of confidence across the ecosystem.”
Silvergate’s CEO Alan Lane was quoted as saying:
In response to the rapid changes in the digital asset industry during the fourth quarter, we took commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows,
“At the end of December, $150 million of the bank’s deposits were held by customers who had filed for bankruptcy protection”, Silvergate stated in its official announcement on Thursday.
Silvergate’s Weak Q4 Stats
The fourth quarter of 2022 saw a 68% decline in deposits tied to cryptocurrencies, according to the bank’s early publication of quarterly data. The corporation liquidated the debt it had on its balance sheet in order to cover the withdrawals.
Read More: Silvergate Affirms Belief In Crypto Despite Q4 Withdrawal Plunge
This also includes an impairment charge of $196 million relating to the buyout of Diem from Facebook (now Meta) back in early 2022. In addition, Silvergate disclosed that it will be terminating the employment of around 200 employees, which accounts for approximately 40% of the company’s total staff, and will also be leaving the mortgage warehouse lending sector.
While speaking about Silvergate’s detachment from the digital currency Diem, the firm stated that,
Given the significant changes in the digital asset industry landscape, this charge reflects the company’s belief that the launch of a blockchain-based payment solution by the company is no longer imminent,
A significant bounce that Silvergate experienced on Wednesday when its shares gained by 27%, has been completely wiped out by the staggering 50% drop it’s currently witnessing in the U.S. stock market today.
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