The cryptocurrency bubble has well and truly burst, and now it's taking down the banks.
Silvergate Bank, one of the largest cryptocurrency banks in the US, has announced it is going into liquidation.
"In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward," holding company Silvergate Capital Corporation announced on Wednesday(opens in a new tab). "The Bank’s wind down and liquidation plan includes full repayment of all deposits."
This comes just five days after Silvergate Bank announced it would discontinue the Silvergate Exchange Network, an instant funds transfer system that was one of its key services. The company has reassured customers that its other deposit-related services are continuing to operate as it winds down, but anyone who has business with Silvergate probably won't want to rely on that.
Based in California, Silvergate Bank turned to cryptocurrency in 2013 and eventually became one of the top US crypto banks. But the higher they rise the harder they fall, and to anyone following Silvergate's woes, the writing has been on the wall for a while.
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FTX's dramatic collapse late last year had a significant impact on Silvergate, as the crypto exchange had been one of the bank's biggest customers. This triggered an $8.1 billion bank run(opens in a new tab) on Silvergate, forcing it to liquidate $5.2 billion in debt securities to cover the withdrawals and take a $718 million loss — a loss which vastly exceeded the bank's profit since 2013(opens in a new tab).
Silvergate also laid off 40 percent of its workforce in January, sending its stock plummeting by 46 percent, while deposits in the fourth quarter fell by around 68 percent(opens in a new tab). Reading the signs, a laundry list(opens in a new tab) of large crypto exchanges such as Coinbase and Galaxy Digital cut ties with Silvergate(opens in a new tab) last week, which likely exacerbated the bank's struggles.
At its height, Silvergate Bank was valued at $222 per share in Nov. 2021. Last week ended with Silverbank at $5.77 per share, and as of writing it is currently valued at $2.76(opens in a new tab) — a drop of over 98 percent since its peak.
