As the fallout from FTX’s collapse last year reverberates through the industry, shares of crypto-focused companies slumped on Thursday after Silvergate Capital Corp (SI.N) declared plans to wind down operations and voluntarily liquidate.
Experts said that depending on how quickly unpaid loans are repaid and assets are sold, a total shutdown of the cryptocurrency lender might take one or two years.
The most recent action by Silvergate is another high-profile failure among participants in the cryptocurrency market since last year.
A day after setting a new record low, the business’s shares fell 37% to $3.11. They have lost 64% of their value since the company raised a going concern risk on March 1.
“We believe this decision was made, at least in part, to help mitigate Silvergate Bank’s legal liability related to FTX’s bankruptcy,” Wedbush analysts wrote in a note.
Upon being contacted for comment regarding the analysts’ viewpoint, Silvergate did not answer right away.
Silvergate shares have lost 95% of their value over the past year and 72% so far this year, making shorting them advantageous for pessimistic investors.
According to analytics firm S3 Partners, short sellers have a short position on about 85% of the company’s free float and have made mark-to-market profits of $241 million so far this year.
Shares of competing institution Signature Bank (SBNY.O), which has been moving away from cryptocurrencies since late last year, decreased by 8%.
Only 18.5% of Signature’s entire deposit amount was made up of digital assets, according to the company’s second mid-quarter update this month.
Coinbase Global (COIN.O), a cryptocurrency exchange that severed connections with Silvergate last week, fell by about 1%. Riot Blockchain (RIOT.O) and Marathon Digital (MARA.O), two miners, each had a 2.3% decline.
According to analysts and investors, the market impact of the news was minimal because it was widely anticipated. Bitcoin remained stable at $21,711, close to its lowest level since mid-February.
