another bankruptcy shakes up the industry, Bitcoin’s price is unscrewed


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Another bankruptcy is shaking the world of cryptocurrencies. As the industry gradually recovers from the FTX betrayal, a bank close to the industry has just announced its bankruptcy, penalizing the price of Bitcoin…

Silvergate capital, the parent company of Silvergate bank, has just announced its closure. In a short press release, the Californian company explains that it intends go into liquidation. Specifically, all of the bank’s assets, as well as the technologies developed by it, will be resold to the highest bidder.

Good news, the company says all customers will be well refunded. In order to secure repayments, Silvergate will rely in particular on the process of liquidating its assets. The Federal Deposit Insurance Corporation, the organization responsible for guaranteeing US citizens’ bank balances, should in theory step in and cover up to $250,000 in losses.

In the announcement, Silvergate explains its decision “recent industry and regulatory developments”, which hardened on the sidelines of the crash. Like many players in the crypto ecosystem, Silvergate in particular has suffered greatly fall in the market and the consequences of the FTX disaster.

Also read: Will the victims of the FTX fiasco really get their cryptocurrencies back?
A look back at the collapse of crypto banking

Silvergate was born in 1988, long before the rise of Bitcoin and the cryptocurrency world. Originally it was a small local bank in California. Headed by the CEO Alan Lane, the bank gradually switched to cryptocurrencies from 2013. He was already convinced of the booming future of cryptocurrencies. He had also invested in Bitcoin on a personal basis.

Silvergate therefore started bidding asset management services ecosystem companies, against the tide of other banks. By making use of the hostility of traditional banks With regard to the cryptocurrency industry, Silvergate has quickly won over many companies. In a few years of activity, the bank has attracted more than 200 entities in the sector, creating an almost unprecedented bridge between traditional finance and the world of cryptos.

To attract customers, the bank even launched the Silvergate Exchange Network (SEN). This banking network enabled users of the bank to instantly exchange assets at any time. The network facilitated exchanges between ecosystem players. It was finally shelved last week, a prelude to Silvergate’s impending death.

Already weakened by the cryptocurrency crash, Silvergate lost its footing shortly after the sudden fall of the FTX empire. The bank managed some of the assets of FTX and its sister companies, including Alameda Research. Silvergate is accused of silencing the suspicious activities of Sam Bankman-Fried, founder of FTX. by its partners. Major clients, such as giants Coinbase, Paxos, Circle,, GSR and Wintermute, distanced themselves from the banking industry, causing its downfall… A wave of massive withdrawals – more than $8 billion in three months – exacerbated the situation , cut back on the bank’s reserves.

More than 90% of the deposits the bank received came from the crypto asset sector.
This is why the cryptocurrency crash, which started last year with the death of UST, was fatal for the bank. For the past year, Silvergate has recorded $948 million in losses. These catastrophic results penalized the group’s stock market action. To raise the bar, Silvergate laid off 40% of its workforce, or 200 employees. In vain.

Before the debacle, Silvergate succeeded the assets of more than 1,500 entities of the ecosystem, including many heavyweights. To put their users at ease, many platforms were quick to reveal that their ties to Silvergate were centuries old at the time of liquidation. This is the case of Coinbase, which claims to have no funds stored with its former partner. The US platform had halted upstream transfers, fearing bankruptcy. For its part, Binance, the market leader, indicates that it has lost no assets in the bank’s debacle. At this stage, it is to be feared that the entities actually affected have not yet communicated about possible losses.

Silvergate bankruptcy penalizes cryptocurrencies

This umpteenth bankruptcy has triggered the fragile revival of cryptocurrencies. In the margins of Silvergate’s liquidation, the price of Bitcoin is suddenly flattened less than $22,000. As always, King Bitcoin’s decline dragged the entire market down. The valuation of the entire ecosystem has fallen below $1 trillion, dampening the sector’s tentative recovery.

silvergate bitcoin price

© CoinMarketCap

note that market reaction was rather limited so far. Investors and observers had long anticipated the bad news. The bank has been suggesting for several months that a liquidation is inevitable. This is why Bitcoin and other tokens did not completely collapse when Silvergate released its statement.

Silvergate’s bankruptcy is on top of that the long list of companies related to crypto that have bitten the dust for the past twelve months. These were marked by the successive deaths of platform Celsius, hedge fund Three Arrows Capital, broker Voyager Digital, FTX, exchange BlockFi, investment fund Genesis and LocalBitcoins. Yet it is the first time that a bank has closed its doors because of its close ties with the sector.

Source :

The block