As withdrawals spiked following the demise of industry titan FTX, top asset management firm Silvergate Capital Corp reported a steep decline in fourth-quarter crypto-related deposits on Thursday and announced it would lay off 40% of its personnel (around 200 staff members).
In the premarket trade, the company’s shares, which lost around 88% of their value in 2022, were down 40%. According to the last financial report from the crypto-focused bank, total deposits from consumers of digital assets decreased from $11.9 billion at the end of September 2022 to $3.8 billion at the end of December 2022.
The bank sold $5.2 billion in debt instruments in the fourth quarter at a loss of $718 million to retain liquidity. Last year, the crypto market lost more than a trillion dollars in value as increasing interest rates fueled concerns about an economic slump.
The downturn, including the collapse of cryptocurrency lender Celsius and the hedge firm Three Arrows Capital, contributed to the downturn in the industry. Also, the world’s leading digital currency, BTC, witnessed significant falls in 2022 after spectacular rises in 2020 and 2021.
The poor performance of BTC often hurts the performance of other cryptocurrencies and the broader crypto industry. The leading crypto exchange FTX filed for bankruptcy protection in November, dealing the industry its worst blow.
Also read:Consequently, cryptocurrency businesses are under intense regulatory scrutiny over how they manage their funds and run their operations. Since the FTX meltdown, Silvergate has also come under regulatory scrutiny as politicians hurry to enact new regulations for the unregulated cryptocurrency sector.
The asset management firm had previously said that FTX was not a custodian for any leverage loans it had made to the Silvergate Exchange Network and had no outstanding loans or investments in FTX.
Cryptocurrency Deposits Drop
The bank said that deposits related to cryptocurrency fell by a startling 68% in the most recent quarter. Per a WSJ report, Silvergate has more cash deposits than virtual asset deposits, according to a Wall Street Journal.
In contrast to its $3.80 billion deposits during the quarter, the bank had $4.60 billion in cash. While Silvergate is taking concrete steps to manage the present climate, its objective has remained the same, unwavering support for digital asset management.
Following the FTX crash, cryptocurrency lender BlockFi filed for bankruptcy, raising concerns about Silvergate’s liquidity. After BlockFi’s bankruptcy filing, the price of Silvergate stock decreased due to the news of exposure to the lending firm.
The bank claimed to have little exposure to BlockFi at the time. Nevertheless, the premarket hours saw a significant decline in the stock price of Silvergate Capital. The value of the Silvergate shares has decreased by around $6 as of this writing, or about 29%.
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