Silvergate’s deepening crisis sends crypto stocks tumbling

March 6 (Reuters) – Shares in Silvergate Capital Corp ( SI.N ) fell as much as 11% on Monday after the bank suspended its crypto payments network and expressed doubts about the viability of the business.

The stock ended the volatile session 6.4% lower at $5.40, after swinging wildly between gains and losses throughout the day.

Several crypto stocks also closed in negative territory. Crypto lending peer Signature Bank ( SBNY.O ) was down 2.5%. BTC mining machine makers Ebang International and Canaan Inc ( CAN.O ) fell 2.8% and 8.4% respectively. BTC buyer MicroStrategy ( MSTR.O ) fell 3.8% and exchange Coinbase Global ( COIN.O ) fell 2.7%.

Crypto-focused bank Silvergate said late on Friday that it had made a “risk-based decision” to wind down the Silvergate Exchange Network (SEN) effective immediately.

“SEN is Silvergate’s main flagship product which was previously the key attraction for depositors to bring funds to the bank,” analysts at Wedbush said.

The liquidation may signal that Silvergate may consider liquidating the business, they added.

Silvergate shares hit a record low of $4.86 on Friday, losing nearly 98% of their value since closing at a record high in November 2021 and wiping more than $7 billion from the company’s market value.

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

“We believe a settlement/liquidation scenario is a distinct possibility and arrive at a liquidation value of $5 per share,” Wedbush analysts said. The estimated price marks a downside of approximately 13% compared to the stock’s previous close.

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

The firm has struggled to stay afloat after the collapse of Sam Bankman-Fried’s crypto exchange FTX in November prompted investors to withdraw $8 billion in deposits from the bank in the last three months of the year.

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

Reporting by Manya Saini in Bengaluru; Editing by Anil D’Silva, Devika Syamnath and Krishna Chandra Eluri

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