Silvergate Capital Corp, one of the most cryptocurrency-friendly financial institutions in the US, continues to plummet on the New York Stock Exchange, causing other high-profile crypto-related companies to distance themselves from the beleaguered firm.
Silvergate’s market valuation has now fallen over 60% since the bank told US regulators on Wednesday it was “unable” to file its annual earnings report as expected, even after receiving an extension until March 16, citing “certain regulatory and other inquiries and investigations” in the group.
Substantial financial losses over the past financial year could result in the company being “less than well-capitalised”, admitting that these losses may impact its ability to operate “as a going concern” in the year ahead.
Crypto market jumps ship
Now Silvergate’s fellow listed crypto firms are putting themselves at arm’s length of the bank.
MicroStrategy, the world’s largest corporate bitcoin holder, announced that it has a US$200mln loan from Silvergate due March 2025, per filings with the Securities and Exchange Commission (SEC).
The loan is collateralised with bitcoin at a 25% required loan-to-value ratio.
MicroStrategy said that “the loan wouldn’t accelerate” in the event of Silvergate’s insolvency or bankruptcy, a potential godsend given that MicroStrategy only has US$44mln in the bank per its latest earnings call.
An acceleration of the loan would force a liquidation on MicroStrategy’s bitcoin collateral.
However, it is unclear what would happen should the loan be transferred to a buyer that does not accept bitcoin as collateral, which is most major financial institutions.
“We have no other financial relationship (with Silvergate), MicroStrategy Tweeted.
Proactive has asked Microstrategy for further comment.
Coinbase announced that “in light of recent developments”, the Nasdaq-listed cryptocurrency exchange will no longer accept or initiate payments to or from Silvergate.
"Coinbase has de minimis corporate exposure to Silvergate," the company Tweeted to assure customers.
Circle, Paxos, Crypto.com, Bitstamp, Cboe Digital Markets, Galaxy and Gemini have all said they will suspend business with the bank.