Silvergate Capital Announced a $1 Billion Net Loss for Q4, 2022

The cryptocurrency-focused bank – Silvergate Capital – reported a net loss of $1 billion for the last quarter of 2022 due to the turmoil reigning in the digital asset sector.

The firm recently laid off nearly half its workforce amid massive client withdrawal requests.

The Disappointing Q4

The fourth quarter of 2022, with its market decline and company bankruptcies, put a dark stamp on crypto’s legacy. The California-based Silvergate Capital said those dynamics triggered a “crisis of confidence across the ecosystem” and caused financial damage to multiple entities. 

The crypto bank reported a $1 billion net loss attributable to common shareholders in Q4, or a $33.16 loss per common share. It further revealed a net income of $40.6 million, or $1.28 per diluted share, for the third quarter and a net income of $18.4 million ($0.66 per diluted share) for Q4 2021. 

The entity saw a decrease in digital asset customers: from 1,677 on September 30, 2022, to 1,620 at the end of December. 

The Silvergate Exchange Network facilitated $117.1 billion of US dollar transfers during the last quarter of 2022, which is a 4% increase compared to the $112.6 billion in Q3. Still, the figures were quite more impressive in Q4 2021, when it handled $219.2 billion.

Digital asset customer-related fee income equaled $6.6 million, a 16% decrease compared to the previous quarter. 

Average crypto deposits accounted for $7.3 billion during Q4, significantly less than the $12 billion registered in the third quarter of last year. 

Despite the reported loss, Silvergate’s shares surged by nearly 12%. Currently, SI trade at approximately $14.70, while they hovered around $13.20 yesterday.

The Previous Issues

Silvergate stated in November last year that its financial relationship with BlockFi was limited to less than $20 million of its total customer deposits. It also asserted it has no investments in the bankrupt cryptocurrency lender.

Prior to that, CEO Alan Lane outlined that the collapsed crypto giant FTX was not a custodian for Silvergate’s bitcoin-collateralized SEN leverage loans. He added that his company has no outstanding credits or investments in the exchange.

Nonetheless, many firm clients withdrew their assets, while SI plunged by 45%. To preserve its financial stability, Silvergate dismissed around 40% of its employees and backed off from the idea of launching its own digital currency project.

Despite the difficulties, Lane said the company remains a proponent of the cryptocurrency industry and maintains a “highly liquid balance sheet with a strong capital position.”

“While we are taking decisive actions to navigate the current environment, our mission has not changed. We believe in the digital asset industry, and we remain focused on providing value-added services for our core institutional customers,” he added.

Featured Image Courtesy of Capital