Silvergate's Deepening Crisis Jolts Crypto Stocks

Shares of Silvergate Capital Corp fell as much as 11% on Monday after the bank suspended its crypto payments network and expressed doubts over the viability of its business.

The stock closed the volatile session 6.4% lower at $5.40, after wild swings between gains and losses through the day.

Several crypto stocks also closed in negative territory. Crypto lending peer Signature Bank was down 2.5%. BTC mining machine makers Ebang International and Canaan Inc dropped 2.8% and 8.4%, respectively. BTC buyer MicroStrategy declined 3.8% and exchange Coinbase Global slipped 2.7%.

Crypto-focused bank Silvergate said late on Friday it had made a "risk-based decision" to discontinue the Silvergate Exchange Network (SEN) effective immediately.

"The SEN is Silvergate's main flagship product that previously was the key attraction for depositors to bring funds to the bank," said analysts at Wedbush.

The discontinuation could signal that Silvergate may consider winding down its operations, they added.

Shares of Silvergate hit a record low of $4.86 on Friday, shedding nearly 98% of their value since closing at an all-time high in November 2021 and wiping out more than $7 billion from the company's market capitalization.

"The crypto market reacted to the negative news from Silvergate Bank, with both bitcoin and ethereum down about 4.8% for the week," analysts at brokerage Bernstein said.

Graphic: Crypto-friendly bank's shares dive as industry winter bites

"We believe a receivership/liquidation scenario is a distinct possibility and arrive at a liquidation value of $5 per share," Wedbush analysts said. The estimated price marks a roughly 13% downside to the stock's previous close.

A slew of crypto heavyweights including Coinbase Global have dropped Silvergate as their banking partner.

The firm has been struggling to stay afloat after the collapse of Sam Bankman-Fried's crypto exchange FTX in November drove investors to pull out $8 billion in deposits from the bank in the last three months of the year.

Silvergate reported a net loss of $1 billion in the fourth quarter.

Graphic: Crypto-related deposits at Silvergate plunge