🐻 All about the Silvergate FUD

Hey crypto nerds, it’s been a relatively steady week for the market, but not so much for our friend Silvergate Bank. We’ve got an interesting issue for you today that digs into some serious FUD that impacts many big crypto names. Are you ready?

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In this issue:

📣The big story of the week. Silvergate Bank is in big trouble and likely headed toward bankruptcy. What does this mean for the rest of crypto?

🚀The good. The unlock of Mount Gox creditor assets and staked ETH is coming close.

🐻The big, bad FUD. Coinbase is halting trading of Binance USD (BUSD) and Robinhood’s crypto operations could be in trouble with the SEC.

📣 The big story of the week

Silvergate Bank is in big trouble

Since the FTX fallout, the Silvergate Bank domino was just waiting to fall. This week, it finally hit its tipping point as it tumbles nearly -50% pre-market. What does this all mean?

In this issue, we’re going tell you exactly what Silvergate Bank is, what the FUD is all about and how it could impact the rest of crypto.

🤔 First of all, what the heck is Silvergate Bank?

You may have heard of this name floating around before, but never knew what it was. That’s because Silvergate is a critical piece of infrastructure supporting several big crypto names in the background. Some of their most notable clients are Coinbase, Kraken, Gemini, and FTX. Nothing to worry about here 🤡.

Silvergate Bank has been in business for over 30 years now. By 2019, they became the largest crypto bank in the US, servicing over 1,600 crypto-related businesses. When they went public ($SI) at the end of 2019, their share price sat at $12, but quickly climbed to over $200 a share by 2021.

Bullish right? So what does Silvergate actually offer their clients? They provide a range of services to help crypto companies streamline their financial operations, including wire transfers, ACH payments, and API integrations. In other words, Silvergate helps facilitate their client’s crypto transactions and liquidity needs.

One of their most popular services is their Silvergate Exchange Network (SEN) which allows crypto investors to instantly transfer money from their US bank account to a crypto exchange. Quick settlement is crucial in this industry, so you get the point about the important role Silvergate plays 👍.

🦠 The FTX plague begins

However, no crypto company was immune from the FTX plague. In fact, Silvergate was the one facilitating all the fraudulent fund movements for FTX. Not a good look to be an accomplice.

Not only did FTX account for 10% of Silvergate’s total assets, but according to its bankruptcy filings, at least 20 of FTX’s related entities (eg Blockfi, Gemini) are also clients of Silvergate 🤦‍♀️.

So to no surprise, when the FTX collapse happened, Silvergate’s share price immediately dropped nearly 85% and everyone was speculating that the major crypto bank could go bankrupt too.

This thread gives a good play-by-play account of Silvergate’s downfall since the FTX collapse 👇.

🫠 And here comes the tipping point

That brings us to this week. On Wednesday, Silvergate delayed filing its annual report to the SEC, revealing that there were even more losses on top of the nearly $1 billion loss after the FTX crash.

They said that “the company is currently in the process of reevaluating its business and strategies in light of the business and regulatory challenges it currently faces.”

🥴 So what does this mean for the crypto industry?

Since the FTX fallout, SBF’s client testimonial for Silvergate has been removed from their website. But we gotta say, it’s pretty spot on. “Life as a crypto firm can be divided up into before Silvergate and after Silvergate”.

Several of their crypto clients have already come out with notices that they will no longer be working with Silvergate. Here’s the list so far: Coinbase, Circle, Crypto.com, Paxos, Digital Galaxy, Ledgerx and CBOE. So, what’s the alternative?

Some of them are turning to Signature Bank, but it all seems one and the same. How long will it really last?

It’s unclear what will happen next, other than that it is likely game over for Silvergate. For the rest of the crypto industry though? Better store your assets safely away from any centralized exchange or platform 🫡. However, this is mostly a big hit for fiat on-ramp and bringing folks into the crypto ecosystem.

🚀 The good

💰 Mount Gox creditors may start to see their Bitcoin repayments this month after waiting 9 years since its bankruptcy.
🔐 The unlock of staked ETH is coming as the major Shanghai update draws closers.
🎨 Yuga Lab, creator of BAYC, announces the launch of their own Bitcoin NFT collection.

🐻 The big, bad FUD

🛑 Coinbase to halt trading of Binance USD (BUSD) on March 13, 2023 for not meeting their “listing standards”.
🔍 Robinhood’s crypto operations is under investigation by the SEC.

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