Silvergate Capital Could Benefit From Institutional Crypto Adoption, Wells Fargo Says

The Wall Street bank initiated coverage of the stock with an "overweight" rating and a $120 price target.

AccessTimeIconJun 13, 2022 at 1:08 p.m. UTC
Updated May 11, 2023 at 5:36 p.m. UTC

Ongoing institutional adoption of cryptocurrencies and product innovation should help maintain Silvergate Capital’s (SI) growth profile, Wells Fargo (WFC) said in a report on Monday.

"Much of the bear case is priced in at current levels, which makes for an attractive entry point,” the Wall Street bank said in the report, initiating coverage of the stock with an "overweight" rating and a price target of $120 a share.

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  • Silvergate’s stock was down over 17% in pre-market trading at $61.06, which is nearly half of Wells Fargo’s price target. Crypto-exposed stocks slumped on Monday as bitcoin (BTC) fell to an 18-month low amid poor macro sentiment and lending protocol Celsius stopping withdrawals.

    Wells Fargo says the market is in the early stages of crypto and blockchain adoption, and Silvergate provides a regulated and FDIC-insured platform for investors looking to on-ramp and off-ramp U.S dollars into the crypto ecosystem.

    The Federal Deposit Insurance Corporation (FDIC) is a government agency that is tasked with maintaining stability and confidence in the U.S.’s financial system. It insures deposits and supervises large financial institutions.

    “While crypto’s role in the financial ecosystem is still up for debate, what cannot be ignored is the wide scale adoption of crypto and blockchain products by some of the largest global institutions," the note said.

    Companies such as JPMorgan (JPM), PayPal (PYPL), Block (SQ), Tesla (TSLA), Mass Mutual (MCI), CME Group (CME), ICE (ICE), Fidelity and Northern Trust (NTRS) have all began to embrace the concept of crypto, and some pension and mutual funds are allocating capital to the asset class, it added.

    This institutional adoption is reflected in the growth in Silvergate’s digital customers, which has been expanding at a 35%-40% rate year on year since 2019, the bank said.

    Silvergate has built a strong network effect via its Silvergate Network (SEN), which is used by some of the biggest exchanges and institutional clients in the digital asset space, it added.

    The bank plans to roll out its own U.S.-based stablecoin payments platform in 2022 and this opens new potential revenue opportunities, the report said.

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    Will Canny is CoinDesk's finance reporter.