Crypto stocks slide after Silvergate decides to shut down

Shares of crypto-focused companies fell on Thursday after Silvergate Capital Corp (SI.N) disclosed plans to wind down operations and voluntarily liquidate, as the aftermath of FTX’s implosion last year reverberates through the industry.

Analysts said a complete closure of the crypto lender could take one or two years depending on how quickly outstanding loans are repaid and assets are disposed of.

Silvergate’s latest move adds to a list of high-profile collapses among crypto market players since last year.

The company’s shares plunged 37 per cent to $3.11, a day after hitting a record low and have lost 64 per cent since March 1 when the company flagged a going concern risk.

“We believe this decision was made, at least in part, to help mitigate Silvergate Bank’s legal liability related to FTX’s bankruptcy,” Wedbush analysts wrote in a note.

Silvergate did not immediately respond to a request for comment on the analysts’ view.

Meanwhile, shorting in the shares of Silvergate has proved profitable for bearish investors as its shares have lost 95 per cent of their value in the past 12 months and 72 per cent so far this year.

Nearly 85 per cent of the company’s free float is under short position with short sellers making $241 million in year-to-date mark-to-market profit, according to analytics firm S3 Partners.

Shares of peer Signature Bank (SBNY.O), which has been pivoting away from crypto since late last year, fell 8 per cent.

In its second mid-quarter update this month, Signature said digital assets accounted for just 18.5 per cent of its total deposit balance.

Crypto exchange Coinbase Global (COIN.O), which cut ties with Silvergate last week, dipped nearly 1 per cent. Miners Riot Blockchain (RIOT.O) and Marathon Digital (MARA.O) slid 2.3 per cent each.

Bitcoin steadied at $21,711, near its lowest level since mid-February, with analysts and investors saying the market impact of the news was limited as it was widely expected.