VOT Research Desk – Chain Analysis
Market Analytics and Technical Considerations
Shares of Silvergate Capital (SI) decreased early Friday morning, indicating that investors are still alarmed by FTX’s quick unwinding.
On Thursday, Silvergate CEO Alan Lane made an effort to reassure investors that the market turbulence brought on by FTX’s demise will not have an impact on the company’s operations.
At the Oppenheimer Blockchain & Digital Assets Summit, Lane stated, Suffice it to say, regardless of whether deposits are up or down, we have the cash flow and the capital adequacy to handle the turbulence.
But the company’s stock price plunged by about 10% on Friday, suggesting that his message was ineffective. More generally, after the crypto bull run of last year, shares of Silvergate Capital have plummeted 85%.
Several hours after Lane made his comments, the cryptocurrency prime brokerage FalconX declared that it was not employing Silvergate SEN Leeway, which allows institutional investors to transact on any asset on now with leverage collateralized by bitcoin or dollars, “out of an extra precaution.” Additionally, it won’t be sending wire transfers using the crypto banker.
Silvergate stated that FTX is not a custodian for any of its bitcoin-collateralized SEN Leverage loans especially over the past Friday when it disclosed that it had no unpaid loans or investments to FTX. Although FTX has at minimum $1 billion in funds with Silvergate, the bank claims that this sum constitutes just under 10% of the all the deposits from customers that own digital assets.
Since FTX’s demise, corporate and individual investors are on edge as they try to predict how a new market-disrupting epidemic will affect the marketplace and the crypto sector as a whole. The meltdown of Three Arrow Capital in June and the collapse of Terra-Luna in May, respectively, set off the first two contagions.
Prominent FTX critic Marc Cohodes claims that FTX’s deposits with Silvergate continue to represent a considerable chunk of the banker’s total total deposits. Cohodes informed Hedgeye on Tuesday that he would be shorting Silvergate and noted that the quantity of FTX’s funds with the banks is a major cautionary sign.
