Silvergate Capital stock tanks 42% as FTX collapse ripples through crypto

Shares of Silvergate Capital plummeted more than 40% as the fallout from the FTX collapse continues throughout the crypto space.

Video Transcript

JOSH SCHAFER: My play today is Silvergate Capital. Shares sliding more than 40% as the bank revealed FTX-- the FTX collapse has caused a significant blow to its business in an early release of quarterly results today. Silvergate, which provided services to FTX, saw clients withdraw $8.1 billion in the fourth quarter, dwindling what was once 11.9 billion in deposits down to 3.8 billion.

Now Silvergate liquidated that to handle the influx in withdrawals, causing a $718 million loss. The company also announcing today it's cutting back its workforce, reducing headcount by 40% to, quote, "account for the economic realities facing the business and industry today."

Now shares of Silvergate have been under pressure over the last few months as the bank has been named in class action lawsuit. It's one of those out in California claimed Silvergate is liable for furthering FTX's investment fraud and taking first-hand participation in co-mingling funds, Dave.

And really where this sort of stands out to me, too, is Silvergate was a bank that decided to get involved in crypto, right? We know plenty of banks that have opted to not get involved in crypto. And we're seeing where that can maybe go bad. Silvergate saw crypto as a big growth strategy for itself as a bank.

And it did not end up helping them out here. And now they have this big overhang because they have a business that some analysts still like from a traditional banking standpoint, but crypto kind of becoming a big overhang for them now.

DAVE BRIGGS: Yeah, they were at 90% of their assets currently-- or when this all started, it was digital. My question to you is, is it cold storage for people? Where do they put it now?

JOSH SCHAFER: Yeah, I think that's--

DAVE BRIGGS: That's it, right?

JOSH SCHAFER: --the answer we seem to be getting from a lot [INAUDIBLE].

DAVE BRIGGS: Put it in the mattress, essentially.

JOSH SCHAFER: It's the old school or the new school mattress, I guess, we should say, right?

DAVE BRIGGS: Wow, that is scary. An interesting note, Josh, from Wells Fargo. The worst case scenario seems to have come to pass. They also add, we think there has been way too much optimism regarding near-term crypto value improvement. So don't hold your breath about a quick turnaround for the price of Bitcoin or Ether or any other.