Popular cryptocurrency bank Silvergate has had to deal with some issues recently. Too much, because it is now common knowledge that banks are being voluntarily dissolved. Read this article to find out exactly what happened and how the company’s collapse could affect the cryptocurrency market.
Popular Cryptocurrency Banking Provider Says Goodbye
In the US, Silvergate has been a very popular bank for buying and holding crypto. Since the beginning of the year, the company appears to have faltered. Right now, this creates a huge amount of uncertainty for cryptocurrency traders. Memories of the FTX crash that cost millions of dollars come back.
Among other things, U.S. authorities charged the bank with money laundering and fraud related to the client funds used. It should also connect to the FTX platform. Client funds are said to have been transferred to sister company Alameda Research.
Silvergate #crypto bank is crashing pic.twitter.com/ZUG4uial4S
– JV Coach (@Coachjv_) March 9, 2023
As a result, the company is now part of a court case to determine where those funds end up. As a result, Silvergate’s share price has plummeted. The price slipped more than 97 percent and is currently trading at just $2.38. At its peak in 2021, the price of Bitcoin has increased by as much as 100 times.
Reports could provide clarity – but so far not
Due to the allegations mentioned and the connection to FTX, investors and traders are naturally very concerned about whether their coins will continue to be safe on Silvergate. Reports on the company’s financials can clearly illustrate this situation.
This should be published by March 16th. Silvergate has now stated that it will not be able to deliver by the specified date. In a statement, the director wrote that the current developments would create too many difficulties:
“These additional losses will have a negative impact on the company’s regulatory capital ratios … and could result in companies and banks being undercapitalized.”
In addition, they said they were uncertain about becoming an “active company” in the coming months.
Customers respond to this again with withdrawals and sales. By the fourth quarter of 2022, more than $8 billion has been withdrawn. To that end, the company closed last year with a net loss of $1 billion.
Buy Crypto Now More Banks Affected
As traders observed last November, the market reacts very quickly to negative news. Not only will the price drop rapidly. The company’s reputation can also quickly slip to another level. Crypto watcher DB tweeted his thoughts on the issue. Back on March 2, he wrote: “Silvergate loses today: Coinbase, Circle, Paxos, Galaxy, CBOE – RIP”
Silvergate lost today
Chicago Board Options Exchange
– db (@tier10k) March 2, 2023
Circle responded to the Twitter post, writing:
“We maintain relationships with several banking partners. We are responding to concerns surrounding Silvergate and are transacting with them for certain services and notifying customers. Otherwise, all Circle services, including USDC, will operate as usual.”
So, day by day, more and more companies distance themselves from cryptocurrency banks. The fear of another loss is too great. Microstrategy also quickly distanced itself.
We have a loan from Silvergate that’s not due until 1Q’25. The market is concerned about SI’s financial situation. Health status. For anyone wondering, the loan won’t hasten SI insolvency or bankruptcy b/c of course. Our BTC collateral is not hosted by SI and we have no other financial relationship with SI.
– MicroStrategy (@MicroStrategy) March 2, 2023
Customers don’t have to worry about the safety of their shares, the company wrote on Twitter. Still, it recognizes bank loans maturing in early 2025: “For anyone wondering if loans won’t be accelerated by SI’s insolvency or bankruptcy. Our BTC securities are not held by SI, we have no partnership with SI other financial relationships.”
The cryptocurrency company’s reaction sparked a heated discussion on Twitter. Most users who commented on the news considered Silvergate to be the “second FTX”. If this is the case, the onset of bankruptcies could trigger another chain reaction. This could cause financial difficulties for other companies in the industry. Therefore, another price crash is conceivable in principle.
Not just Silvergate or SVB.
This is all banks. None of them own any equity.
They were all wiped out, but because of a false accounting scam. pic.twitter.com/Q5nPf9fSTj
— Paranoid Bull (@paranoidbull) March 9, 2023
The most recent example is the bankruptcy of Silicon Valley Bank, which may now also have an impact on many startups in California. It has the potential to affect the entire economy.
Crypto Prices – Here’s How the Market Has Reacted So Far
The impact of negative news can already be observed in the Bitcoin price. The price fell below the $20,000 mark. The fact that there was an apparent recovery at the time seemed paradoxical.
Today, the price of Bitcoin is back above $24,000. As a result, he was able to quickly catch up to the sharp decline of the past week.
How did it get from here? High volatility is currently expected due to ongoing events. So clearly, a very volatile situation is looming again that will bring back memories of the FTX crash.
If you look at the plus points since the beginning of the year for the price to be able to rise again, these are very negative headlines for the cryptocurrency market. How this will play out for other banks and the cryptocurrency market is currently unpredictable. However, there are reasons for caution.
Silvergate – Banks have been around for a long time
Silvergate was established in 1988. In 2013, they experimented with cryptocurrencies for the first time. Demand grew strongly and the company gained clients from all over the world. A few years later, in 2019, it hit the market. The bank has also been able to hold its ground during some bear markets.
In 2021, the founder and Silvergate jointly invested in the META project and acquired Diem-Technology for $200 million. At the same time, a separate stablecoin should be released. Now the end of the crypto bank is sealed.
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Information source: Compiled by 0x Information from KRYTOSZENE, the copyright belongs to the author Sebastian Schuster, and shall not be reproduced without permission