Cryptocurrency-focused financial institution Silvergate Capital had little to celebrate in its fourth-quarter earnings call on Tuesday.
The company had reported a net loss of US$949mln for the year ending December 31, 2022, compared to net income of US$75.5mln for the year ending December 31, 2021, resulting in diluted losses per common share of -US$30.
Total transfers of US$563.3bn throughout the year were 28% lower than the US$787.4bn in 2021. Additionally, digital asset customer-related fee income for 2022 was US$32.2mln, a decrease from US$35.8 million in 2021.
In the fourth quarter alone, net losses attributable to common shareholders was a straight one billion dollars, or -US$33.16 per common share, compared to net income of $40.6mln, or US$1.28 per diluted share, for the third quarter of 2022, and net income of US$18.4mln, or US$0.66 per diluted share, for the fourth quarter of 2021.
As a result of selling a large portion of the group’s product portfolio and debt securities (for a loss), cash in the bank increased by 140% to US$4.6bn, giving the company a reasonable cash runway for what is expected to be a sustained period of lower deposits ahead.
The writing was on the wall for investors following preliminary results released on January 5, which gave a grim overview of the workforce restructurings, large-scale impairment charges and debt securities fires sales occurring within the business.
In a statement, Alan Lane, chief executive officer of Silvergate, said: “While we are taking decisive actions to navigate the current environment, our mission has not changed. We believe in the digital asset industry, and we remain focused on providing value-added services for our core institutional customers. To that end, we are committed to maintaining a highly liquid balance sheet with a strong capital position.”
Perhaps it could have been worse for the bank, given that Silvergate shares rallied a shock 25% higher following the earnings call. The surprise surge above US$16 may be linked to the rally on crypto markets.
Bitcoin (BTC) has jumped over 20% in the past week alone, while global crypto market capitalisation flirted with one trillion dollars for the first time since FTX crashed the market.
Or perhaps Silvergate had nowhere lower to fall; on a year-on-year basis, the shares remain over 80% lower.