By
Temitope Olatunji
April 26th, 2024
MicroStrategy said that it secured a $205 million loan from Silvergate Bank last year, and there’s no rush to prepay until Q1 2022, even in the case of possible insolvency.
Crypto-focused bank Silvergate Capital (NYSE: SI) has come under severe pressure after the company delayed its filing with the US Securities and Exchange Commission (SEC). Following the collapse of FTX, the bank’s health has deteriorated faster and now talks of possible insolvency are making the rounds. Amid the recent development, the world’s largest corporate holder of Bitcoin – MicroStrategy – has confirmed that it doesn’t have any custody with Silvergate.
Ties between MicroStrategy and Silvergate
Last year in March 2022, Microstrategy secured a $205 million loan from Silvergate Bank due for payment in 2025. However, MicroStrategy added that even in the case of bankruptcy, the loan terms wouldn’t change. In a tweet from its official handle on Thursday, MicroStrategy noted:
“We have a loan from Silvergate not due until Q1 ‘25. There are market concerns regarding Silvergate’s financial condition. Our bitcoin (BTC) collateral isn’t custodied with Silvergate and we have no other financial relationship with Silvergate.”
In its forward-looking statement, Silvergate Bank has mentioned that it might attract more regulatory scrutiny going ahead. The recent developments at Silvergate Bank have attracted sharp reactions from crypto firms.
Crypto exchange Coinbase suspended Silvergate Bank as its partner for the US Dollar and instantly chose its rival aka the Signature Bank. The cryptocurrency exchange also shared a memo with its customers quoting:
“Coinbase Prime has elected to make changes to our USD banking partners. We are facilitating fiat withdrawals and deposits using Signature Bank, effective immediately”.
Coinbase also stated that so far it has minimal exposure to Silvergate Bank. Thus, ending this partnership will have nominal or almost no impact.
Silvergate Contagion Spreads to the Broader Crypto Market
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.
