Silvergate Crypto Deposits Remain Healthy Amidst Market Downturn

Silvergate Capital Corporation announced a steady stream of crypto deposits in the second quarter.

Deposits in the second quarter totaled $13.3 billion, down from $14.7 billion in the previous three months. Diluted earnings per share went up to $1.12, exceeding Wall Street estimates of $0.84. Investors remain bullish despite the slowdown in deposits. Eight out of nine investors surveyed by FactSet Research Systems designate the stock as a Buy. Net income accrued for the second quarter totaled $38.6 million.

Silvergate is a regulated, institutionally-focused bank whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The bank is a member of the Federal Reserve and holds a California state charter.

Good numbers for Silvergate

Silvergate managed to increase its customer base from 1503 at the end of March to 1585 at the end of June, while fee income dipped from $8.9 million in Q1 2022 to $8.8 million in Q2. Fee income is also down $2.5 million from $11.3 million a year ago.

Despite being an institutional lender of USD against bitcoin collateral, Silvergate saw no liquidations during the credit crisis that started with crypto bank Celsius pausing withdrawals. It received $1.4 billion in leveraged commitments, an increase from $1.1 billion at the end of Q1.

The bank’s transfer system, the Silvergate Exchange Network, through which crypto companies like Coinbase, Gemini, and Kraken move funds between each other, serviced $191.3 billion in transfers in Q2.

Silvergate to launch its own stablecoin issued by banks

Silvergate’s CEO touted the platform’s robustness that was able to emerge from the market downturn relatively unscathed. He said that the systems were built to handle volatility and high volumes. He emphasized the company’s strong focus on client liquidity and risk management practices.

The first institutional customer acquired by Silvergate was SecondMarket in 2013, which struggled to find a bank willing to bet on bitcoin. By introducing the Silvergate Exchange Network, the company eliminated some of the lost opportunities experienced by customers trying to do 24/7 bitcoin business with traditional banks operating a 40-hour work week.

Silvergate acquired assets from Meta’s failed Diem stablecoin project in Feb. 2022 for $182 million. The CEO Alan Lane said it plans to launch its own regulated stablecoin in partnership with a consortium of banks in 2022.

The target price for Silvergate’s stock is $124.50, up 60% from the current price.

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