Silvergate Capital drops 40% after crypto bank discloses massive Q4 drawdowns

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Silvergate Capital shares fell 40% premarket on Thursday after the crypto-focused bank released preliminary fourth-quarter results that showed massive customer withdrawals.

Total digital asset customer deposits fell to $3.8 billion from $11.9 billion at the end of the third quarter, a decrease of approximately 68%. The withdrawals came as crypto exchange FTX, a customer of Silvergate, collapsed in scandal, raising questions about the stability of the digital asset industry. Silvergate said there was a “crisis of confidence in the ecosystem”.

At the end of December, $150 million of the bank’s deposits were held by customers who had filed for bankruptcy, Silvergate said.

In order to raise funds during this period, Silvergate sold $5.2 billion of debt securities, creating a loss on sale of $718 million. It reported $4.6 billion in cash and cash equivalents held at the end of December.

“In response to the rapid changes in the digital asset industry during the fourth quarter, we have taken proportionate steps to ensure that we maintain liquidity to meet potential deposit outflows, and we currently maintain a cash position greater than our digital asset related deposits,” CEO Alan Lane said in a statement.

Silvergate also announced that it was laying off 200 employers, or about 40% of its workforce, and exiting its warehouse mortgage business.

Thursday’s stock market move erased a big rally for Silvergate on Wednesday, when shares gained 27%.

Silvergate, which went public in 2019, saw its stock surge to $222 per share in November 2021, the same month as Bitcoin’s all-time high price. Silvergate stock ended 2022 at $17.40, over 90% of its all-time high.

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