After Losing 70% of Its Deposits, Where Does Silvergate Capital Go From Here?

The crypto bank Silvergate Capital (NYSE: SI) has found itself on the ropes after a difficult fourth quarter in which it saw close to 70% of its digital-asset-related deposits

leave the bank. The FTX debacle triggered a crisis of confidence in crypto, which in turn triggered a run on the bank. Silvergate appears to have survived the event, but it

wiped out a significant amount of shareholders' equity in the process because it had to sell bonds while they traded at a loss to meet the deposit outflows. The bank took a hefty

more than $1 billion loss in the fourth quarter. While crypto has since bounced back a bit in 2023, it still very much feels like a risk-off environment for crypto, which

raises the question of where Silvergate goes from here.  The current state of the bank Crypto exchanges and institutional investors use Silvergate because of its Silvergate

Exchange Network (SEN), which is a real-time payments system that allows multiple parties on the network to clear and settle transactions instantly and at all times. These

customers bring large sums of non-interest-bearing deposits that essentially serve as a free source of funding which Silvergate can invest into bonds and loans, and make money on

the spread.