Why Silvergate Capital Sank in January
The bank is reeling from its connection to the cryptocurrency fraud FTX.
According to S&P Global Market Intelligence data, Silvergate Capital's shares (SI-10.21%) dropped 18.2% in January. The scandal involving FTX that rocked cryptocurrency markets in 2022 is still affecting the bank and financial service provider. Silvergate Capital is a crypto-market bank. It was a bank that provided depository services to other crypto-related companies. Sam Bankman-Fried, a fraudster, was one of these customers. It turns out that Silvergate was greatly affected by the FTX scandal. Silvergate had $3.8 Billion in digital assets deposits at the end of 2022. cryptocurrencies) customers, a sharp decline from $11.9 billion at September's end. A bank losing the majority of its deposits within such a short period is not good. It gives the bank less capital with which to make loans. It can also cause bank panic, as customers may ask for their money back immediately, fearing that Silvergate does not have the liquidity to pay them. Silvergate is being questioned by the U.S. government. Senators are currently investigating the bank's relationship with FTX. They also want to know if the bank knew about the fraud at the infamous crypto-exchange. Investors hate uncertainty and any hint at fraud. This likely caused some selling pressure last month. Silvergate is currently in a difficult spot. The bank's book value per share, which is the best indicator of intrinsic value, fell from $46.55 to $12.93 in December 2021 and was at its lowest point since 2022. Avoid investing in Silvergate Capital. Brett Schafer does not hold any position in any of these stocks. Silvergate Capital is recommended by The Motley Fool. The Motley Fool follows a disclosure policy.