Following the disclosure that crypto-focused bank Silvergate Capital Corp (NYSE:SI) may struggle to stay afloat due to significant losses, industry experts have given their opinions on whether the bank will make it out of its current predicament.
The news caused a plunge in stock prices of the company, which dropped 58% on Thursday and was trading down 3% on Friday morning, before seeing a recovery to 4.20% later in the day.
Coinbase Global Inc (NASDAQ:COIN), Galaxy Digital Holdings Ltd (OTC:BRPHF) and Paxos Trust were among the major players in the crypto market who took swift action to end all their ties with Silvergate.
Aegis Custody/Trust CEO Serra Wei commented that after similar events such as the FTX debacle, it is not a surprise that Coinbase opted to use FDIC-insured banks to safeguard their customers’ funds.
This provides a level of protection similar to an insurance policy, adding an extra layer of security. Wei added that companies taking such steps to protect their clients’ assets will likely be in the best position to thrive in the industry’s new landscape.
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At the opposite end, Gateway.fm’s CTO Igor Mandrigin expressed his worries about the reports, particularly given the volatile share prices. He also brought up the reference to the bank in the announcement, which stated that the bank was looking into “sale of additional investment securities beyond what was previously anticipated”.
Read Also: UK Banks Place Restrictions On Crypto Assets For Retail Clients
Mandrigin asserted that any negative headlines in the crypto space could have a damaging impact on the industry as a whole. He further highlighted the importance of crypto businesses working with banks that are reliable and can offer the necessary financial services.
The recent news of Silvergate Capital (NYSE: SI) facing financial difficulties has caused uncertainty in the cryptocurrency industry. Standard DAO CEO and cofounder of BattlePAC Aaron Rafferty stated that if Silvergate was found to be complicit with the illegal transfers between Alameda and SBF/FTX, it could create a dark cloud for the entire crypto space.
Robert Quartly-Janeiro, chief security officer of the Tier-1 crypto exchange Bitrue commented on the potential downfall of Silvergate, saying that the market reaction to the news was surprising considering the ongoing questions around the bank’s financial stability. Furthermore, Silvergate had been selling assets at a discount and searching for new capital, which did not help to improve the situation.
Brandon Berman from BofA Securities Research stuck to his Underperform rating of the bank, noting that if Silvergate becomes ‘undercapitalized’, they may face restrictions to their activities, including asset growth. Michael Perito from Keefe, Bruyette & Woods added that this event raises questions about the future of cryptocurrency banking, as Silvergate was seen as the most regulated and transparent counterparty in the institutional trading market.
As the situation develops, it remains to be seen whether Silvergate will be able to survive this challenging period.
