Silvergate Stock Price Has Nosedived as Bankruptcy Fears Rise

Silvergate stock price has been in a steady downward trend as its exposure to the crypto industry has worsened. The shares tumbled by more than 40% on Thursday as it published its interim results and laid off employees. It plummeted to a record low of $12.10, which was about 95% from its all-time high. 

Crypto bank is collapsing

Silvergate Capital has had a remarkable fall from grace. The company, which was previously a small community bank, gained popularity when it embraced cryptocurrencies. It shifted its busines model to focus more on crypto companies and other players in the industry.

Silvergate provides its solutions across two business segments: Digital Currency and Commercial Banking. The former provides solutions like Silvergate Exchange Network, SEN Leverage, and institutional custody. On the other hand, the former business provides traditional business banking solutions.

Silvergate stock price has been in a strong bearish trend in the past few months because of the collapse of cryptocurrencies. Bitcoin moved from an all-time high of near $70,000 to about $16,000. Similarly, other coins lost over 60% of their total value. Silvergate, like Coinbase, has a close correlation to crypto prices.

Silvergate Capital’s challenges worsened when FTX and Alameda Research collapsed. The two companies were some of its biggest clients. As such, as existential risks rose, the company saw significant outflows. Its total customer deposits dropped to $3.8 billion on December 31 from $11.9 billion in September. 

Silvergate decided to cut about 200 jobs in a bid to conserve cash. It said that it was still a financially sound bank with ovr $3.8 billion in deposits and $5.6 billion of government and agency-backed debt. It hopes to sell some of the debt. Some analysts believe that Silvergate could have a complete collapse if cryptocurrencies experience the same headwinds it had in 2022.

Silvergate stock price forecast

The daily chart shows that the Silvergate share price has been in a strong sell-off for months. It managed to move below the important support level at $51.87, the lowest level on July 5. It has moved below all moving averages. Therefore, the outlook of the stock is still weak considering that the Fed pointed that it will continue hiking rates in 2023.