The news of possible insolvency in the Silvergate Bank has got everyone talking about whether there’s another FTX episode in the making. The contagion has also spread to the crypto space as Bitcoin and the broader crypto market correct 5%. In the last 24 hours, the market fall has erased over $70 billion of investors’ wealth. As of press time, Bitcoin (BTC) is trading 4.5% down at a price of $22,398 and a market cap of $432 billion. Apart from this, altcoins have entered a steeper correction.
The price of Ethereum (ETH) is down by more than 5% dropping to $1567 level. There’s a similar magnitude of correction among the rest of the top 20 cryptocurrencies. On Thursday, March 2, the stock price of Silvergate Capital (NYSE: SI) crashed more than 57% in a single day to $5.72. Over the last year, the SI stock has lost 95% of its value.
Microstrategy recently took to Twitter to reassure investors – and the market as a whole – of its supposedly “minimal exposure” to Silvergate, a struggling crypto bank that has since been the subject of online discourse after news of a later-than-usual 10-K filing sends shockwaves to its stocks and the crypto market.
According to the tweet, the company explained to its 175,000 followers that even if Silvergate becomes insolvent, the $205 million loan by Microstrategy won’t be accelerated to meet the bank’s financial needs. This, however, was not taken lightly by the market with major cryptos tumbling by 5% in the daily time frame.
In a recent tweet, business intelligence firm MicroStrategy clarified that their Bitcoin holdings, valued at $2.9 billion and comprising over 130,000 Bitcoin, are not held in custody by Silvergate and that they do not have any other financial ties with the embattled crypto bank. The Michael Saylor-founded firm disclosed that it has a loan from Silvergate, adding that it will not need to pay back the loan until Q1 2025 and that a bankruptcy or insolvency event wouldn’t “accelerate” the loan repayment.
The news comes after Silvergate announced earlier this week that it would not be able to file its annual 10-K financial report to the SEC on time and that it is evaluating its ability to stay in business – the bank’s shares fell more than 55% Thursday following the announcement.
Silvergate is a traditional, federally insured lender that has positioned itself as a gateway to the crypto sector. It offers a 24/7 payments platform named Silvergate Exchange Network, which has reportedly processed over $1 trillion in transactions since 2017.
Silvergate was among the lenders hit hardest by the fall of FTX in November last year. As reported, Silvergate suffered a bank run following the collapse of FTX and had to sell $5.2 billion of debt securities it was holding on its balance sheet at a significant loss to cover around $8.1 billion in user withdrawals.