• Silvergate Bank announced it would begin winding down operations and undergo voluntary liquidation due to recent industry and regulatory developments.
• This decision caused shockwaves in the crypto market, with Bitcoin dropping to its January low of $19,680 and the total crypto market cap dipping below $1 trillion.
• The domino effect triggered by Silvergate will affect not only cryptocurrency companies in the U.S., but the entire banking sector in the country.
Introduction
Silvergate bank recently announced it would begin winding down operations and undergo voluntary liquidation due to recent industry and regulatory developments. This news sent shockwaves through the crypto market, as Silvergate served as a backbone for most large crypto companies and exchanges in the US. The domino effect triggered by Silvergate will affect not only cryptocurrency companies in the US, but also impact the entire banking sector in the country. This report dives deep into Silvergate to explore what brought about its demise, how other banking giants could share its fate, and potential ramifications of this development on markets.
How Silvergate Got Big
Silvergate has been operating since 2013 as a financial services provider to digital currency companies across North America. In 2018, it became one of the earliest public banks focused on providing services for digital currencies when it launched an initial public offering (IPO) on NASDAQ Global Select Market under ticker symbol “SI” – making it one of just two publicly traded banks that provide services for cryptocurrencies at that time. Following its IPO launch, SI shares went up from around $8 per share at opening to over $14 per share by early 2021 – reflecting investor confidence in this unique business model despite widespread skepticism about cryptocurrencies during that time period.
Silvergate’s Quick And Painful Death
Since November 2022 when FTX collapsed, SI stock prices have been steadily declining – with a most significant 24-hour loss recorded between March 1st and March 2nd when SI dropped 57%. Following these events, Silvergate submitted an SEC filing stating that they were facing inquiries from U.S Department of Justice (DOJ). Ultimately leading them to halt their real-time settlement service – SEN (SilverGate Exchange Network) – while exploring ways to resolve claims and ensure continued residual value of assets while paying off all deposits owed by clients prior to full liquidation announcement on March 8th 2023..
The Domino Effect
The collapse of Silvergate has had profound effects beyond just cryptocurrency businesses within US borders; global markets felt tremors from this event as well. Bitcoin dropped below $20K for first time since January when trading flat at around $21K for more than a month following this announcement; total crypto market cap dipped below $1T struggling to retain at least $880B at press time; fear index was increasing steadily as trading volumes decreased & exchange withdrawals grew rapidly showing further worsening investor sentiment..
Regulatory Blowback
The reasons behind inquiry from DOJ remain unclear but likely stem from increased government scrutiny over regulations surrounding cryptocurrencies & digital asset exchanges following successful prosecution of Silk Road mastermind Ross Ulbricht & recent influx of institutional investors into space which could be seen as threat or opportunity depending who you ask… Regardless all these events raise serious questions regarding future regulation & compliance standards which need addressing before another similar situation arises again within financial sector or even outside it so proper fallout can be avoided going forward…
Conclusion
In conclusion while details are still murky & exact cause remains unknown current evidence suggest combination regulatory oversight along with changing investor sentiment played major role causing collapse silver gate bank however uncertainly surrounding future enforcement/compliance standards still looms large meaning similar events may happen again if proper steps aren’t taken soon…