• Silvergate Bank announced it would begin winding down operations and undergoing voluntary liquidation due to „recent industry and regulatory developments“.
• Crypto market sentiment worsened after the announcement, with Bitcoin dropping to its January low of $19,680 and total crypto market cap dipping below $1 trillion.
• The decision has triggered a domino effect which will affect not only cryptocurrency companies in the U.S. but the entire banking sector in the country.
Silvergate bank announced it would begin winding down operations and undergo voluntary liquidation due to „recent industry and regulatory developments“. The announcement sent shockwaves through the crypto market, as the U.S. bank served as the backbone for the crypto market, providing financial services to most large crypto companies and exchanges in the country. This news has caused a domino effect that will affect not only cryptocurrency companies in the U.S., but also have implications for the entire banking sector in the country.
How Silvergate Got Big
Silvergate got big when it became one of few banks willing to provide financial services to major players in the cryptocurrency space. In addition, their real-time settlement service – SEN (Silvergate Exchange Network) – made them attractive for many businesses looking for a reliable on-ramp into digital assets trading or custody solutions. This helped make Silvergate become one of few major banks catering to cryptocurrency businesses, a status which it enjoyed until recently when they had to halt SEN’s operations due to inquiries from US Department of Justice (DOJ).
Silvergate’s Quick And Painful Death
Since then, Silvergate’s stock price depreciated by more than 94%, with most significant 24-hour loss recorded between March 1st and 2nd when SI dropped 57%. The news caused an immediate downturn in sentiment within crypto markets – Bitcoin dropped back to its January low of around $19k while total crypto market cap dipped below $1 trillion mark at press time (March 10th). As investor sentiment is worsening daily with declining trading volumes and growing exchange withdrawals this brings us closer towards fear according to Crypto Fear & Greed Index (Alternative Me).
The Domino Effect
The sudden collapse of Silvergate has sparked worries about other banks that serve similar activities within crypto space such as Anchorage Digital Bank or Avanti Financial Group who might follow suit if faced with similar pressures from governments or other regulatory bodies. This could spell danger for whole banking industry if these entities are forced out of business due to lack of support from authorities or if existing regulations prove too restrictive for them as well as their customers who depend on them for reliable access into digital assets world .
It is clear that regulators are tightening grip over any actors involved with cryptocurrencies including traditional banking giants like JP Morgan Chase who recently shut down accounts belonging individuals dealing with cryptocurrencies citing “business reasons” without elaborating further on what those reasons were exactly . Such move does not bode well for anyone relying on big banks for providing them access into digital assets world especially since majority of available options so far come from smaller actors such as mentioned before Anchorage Digital Bank or Avanti Financial Group .
All things considered we can conclude that while demise of Silvergate was unfortunate event , it did bring attention onto risks associated with providing financial services related to cryptocurrencies by traditional banking giants . It remains unclear how this will play out but what we do know is that current situation looks grim both for those directly involved with cryptocurrencies but also traditional banks who might find themselves facing same fate if they decide disregard warnings signs given by recent events during past month .