Silvergate – Another Crypto Giant Bites the Dust?
Bitcoin Sheds More Than $1,400 In One Hour. Where to Next?
Just when we thought that the effects of the FTX catastrophe are starting to go away, it looks like another prominent crypto figure is making headlines. And not in a good way! Crypto-friendly bank Silvergate is facing financial troubles and several of its clients have cut ties with the finance provider.
Some of the biggest players in the crypto industry, such as well-known exchanges and mining companies, have been using Silvergate to store and move billions of dollars. The FTX exchange was one of Silvergate’s banking clients and it looks like its demise put a large dent in the bank’s bottom line.
Silvergate reported a loss of $949 million for 2021, while in 2022 it reported a profit of $76 million. Let’s not forget that FTX imploded in late 2022, so the current Silvergate troubles are likely a consequence of the working relationship between the two entities.
Silvergate announced Wednesday that its financial position is weaker than it was at the end of the fourth quarter and as a result, it will not be able to file the annual report with the SEC. The bank had previously reported that earnings for the fourth quarter were dreadful. It further continued by saying it was “evaluating the impact that these subsequent events have on its ability to continue as a going concern for the 12 months following the issuance of its financial statements”
Managing Risk and Reassuring Clients
Several high-profile clients and business partners have since distanced from the bank. Coinbase tweeted “At Coinbase all client funds continue to be safe, accessible & available. In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.”
A similar post was made by Circle “We are sensitive to the concerns around Silvergate and are in the process of unwinding certain services with them and notifying customers. Otherwise, all Circle services, including USDC are operating as normal”
Galaxy Digital said it had no “material exposure” to the bank but it had stopped payments to or from the bank.
Technical Outlook – BTC/USD
Bitcoin was hit the hardest, dropping from $23,420 to a low of $22,000 in about 60 minutes. It is currently changing hands at $22,370 but the small rise doesn’t look like it’s the start of a bigger recovery.
The pair has breached the 50-day Moving Average, which shows that the bearish pressure is mounting and opens the door for a move into the lower Bollinger band. For the time being, Bitcoin is on a downward path and the losses could extend further unless the market quickly dismisses the Silvergate threat. The first major support is located at $21,400.