The worsening Silvergate crisis is shaking up cryptocurrency stocks

(Reuters) – Shares of Silvergate Capital Corp. fell as much as 10 percent in early trade on Monday after the bank suspended its cryptocurrency payments network and expressed doubts about the viability of its business.

The crypto-focused bank said late Friday that it made a “risk-based decision” to shut down the Silvergate Exchange Network (SEN) effective immediately.

“SEN is Silvergate’s key core product that was previously the main attraction for depositors to bring money into the bank,” said analysts at Wedbush.

They added that the downtime may indicate that Silvergate may consider winding down its operations.

Shares of cryptocurrency lending Bank Signature Bank (SBNY.O) were also down nearly 2.5% in morning trade, while cryptocurrency exchange Coinbase Global (COIN.O) was down nearly 1%. Cryptocurrency firm Riot Platforms Inc (RIOT.O) and BTC miner makers Ebang International and Canaan Inc (CAN.O) fell between 1% and 2%.

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“The cryptocurrency market responded to negative news from Silvergate Bank, with both bitcoin and ethereum down about 4.8% for the week,” said analysts at brokerage Bernstein.

Shares of Silverjet hit a record low of $4.86 on Friday, shedding nearly 98% of its value since its all-time high in November 2021 and wiping more than $7 billion from the company’s market value.

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“We believe the receivership/liquidation scenario is a distinct possibility and amounts to a liquidation value of $5 per share,” Wedbush analysts said. The estimated price represents a downside of about 13% from the stock’s previous close.

A slew of crypto heavyweights including Coinbase Global have dropped Silvergate as their banking partner.

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The company was struggling to stay afloat after the collapse of Sam Bankman Fried’s FTX exchange in November, prompting investors to withdraw $8 billion in deposits from the bank in the last three months of the year.

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Silvergate reported a net loss of $1 billion in the fourth quarter.

Reporting by Manya Saini in Bengaluru; Editing by Anil D’Silva and Devika Syamnath

Our standards: Thomson Reuters Trust Principles.

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