Will the Silvergate fiasco impact blockchain investments in 2023?
One of the largest #Crypto banks in the world, Silvergate Capital, recently disclosed it is winding up its business, on the back of several bankruptcies in the blockchain space, such as FTX and 3AC. 📉
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Last week, the company closed the Silvergate Exchange Network (SEN) – a payment and settlement platform designed to enable fast, secure, and low-cost transfers of fiat currencies between participating cryptocurrency exchanges and their customers. More than 90 cryptocurrency exchanges were part of the SEN. 💸
Several legislators also raised questions after Silvergate did not catch any suspicious transactions between FTX and Alameda Research, the latter’s sister trading arm. Silvergate held over $1 billion in FTX deposits, while close to $9 billion of customer funds went missing from FTX. 💵
Moreover, Silvergate customers withdrew $8 billion 💰 worth of deposits, forcing the bank to apply for a loan of $4.3 billion from the home bank loan system. This loan is viewed as a last resort which first raised liquidity concerns regarding the company. It was also stated that Silvergate Capital maintained $1.4 billion in cash when their demand deposits were exceeding $13 billion. ⬆️
Shares of Silvergate were down ⬇️ over 35% in early market trading on Thursday March 9th, and investors speculate this collapse could further decelerate investments in the #Blockchain and #Web3 verticals. The crypto winter drove Web3 investments lower by 74% year over year to $2.4 billion in the Q4 of 2022, according to a Crunchbase report. 👀