By
Bena Ilyas
May 13th, 2024
Silvergate recently noted that its relation with FTX is limited to deposits and has no outstanding loans with FTX or Alameda.
Silvergate Capital Corporation (NYSE: SI) continues to feel the effect of the 2022 cryptocurrency winter. Silvergate shares closed Tuesday’s market trading at $18.73, 11.90 percent down from the day’s opening price. Consequently, SI shares are down approximately 87 percent year-to-date, a similar decline recorded in the crypto market. Moreover, the company is heavily collateralized with crypto assets that institutional investors – including MicroStrategy – use to take fiat loans.
The FTX and Alameda’s implosion has exacerbated Silvergate’s predicaments. According to the bank, it had an exposure of approximately 10 percent of its $12 billion liquidity cover, which hammered its stock market over 50% in November. As such, traders are wary of Silvergate shares this week as FTX and SBF investigations take the next level.
“Traders don’t want to hold Silvergate Capital this week as fears that any testimony from FTX could be damning,” said Edward Moya, senior market analyst of the Americas at Oanda. “Lawmakers are trying to find out everything that went wrong with FTX, some of which could spill over to Silvergate. Everyone wants to know if and how Silvergate played a pivotal role in the transferring of customer funds from FTX to Alameda. Any companies with ties to FTX will likely come under tremendous scrutiny.”
Having been in existence for nine years, Silvergate CEO Alan Lane recently noted that the company is well-prepared for the crypto winter. Furthermore, the company has successfully experienced other bear markets.
Silvergate and the Market Outlook
As a federally regulated bank, Silvergate can widen its liquidity by taking loans from the Federal Home Loan Bank and the Federal Reserve Bank. As such, some market strategists believe the company is poised to grow exponentially in the coming quarters.
“We believe Silvergate shares are very undervalued and that the recent decline in its stock price has been due in part to a widespread lack of understanding of the company,” BTIG said. “We continue to view Silvergate as well-positioned to benefit from the institutional adoption of digital assets.”
Notably, the crypto-friendly bank has a market valuation of approximately $673 million with 31.66 shares outstanding. In the past 52 weeks, SI shares ranged between $18.02 and $166.60.
A study conducted by MarketWatch on ten ratings indicates Silvergate shares received an average target price of $48.40.
In a bid to build trust with regulators and customers, Silvergate recently noted that its relation with FTX is limited to deposits and has no outstanding loans with FTX or Alameda. The company has a record of non-liquidated collateralized Bitcoins with its customers.