Crypto Bank Silvergate Capital's Shares Fall After Wells Fargo's Bearish Call

The bank's analysts say Silvergate's growth potential is limited during crypto winter.

AccessTimeIconOct 6, 2022 at 1:41 p.m. UTC
Updated May 9, 2023 at 3:58 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

While it’s still early days in terms of broader digital asset adoption, the growth outlook for Silvergate Capital (SI) as a “pure-play crypto banking solution” is very limited in the current crypto winter environment, Wells Fargo said in a research report Thursday.

Wells Fargo downgraded its rating on the stock from overweight to underweight and cut its price target to $70 from $115, sending the shares down 5% to $74.95 early Thursday.

  • 80% of Meme Coin Performance Occurs During Asia Trading Hours: 10x Research Founder
    00:55
    80% of Meme Coin Performance Occurs During Asia Trading Hours: 10x Research Founder
  • Standard Chartered Bullish on Bitcoin; SOL Crosses $200 Amid Meme Coin Frenzy
    02:16
    Standard Chartered Bullish on Bitcoin; SOL Crosses $200 Amid Meme Coin Frenzy
  • What's Driving the Rally in Reddit Community Token MOON?
    01:06
    What's Driving the Rally in Reddit Community Token MOON?
  • Tokenization and Stablecoins Continue to Be TradFi's Top Interest in Crypto: Expert
    00:53
    Tokenization and Stablecoins Continue to Be TradFi's Top Interest in Crypto: Expert
  • Silvergate is one of the most asset-sensitive banks, but deposit outflows due to weaker crypto prices more than offset the benefits from higher interest rates, a Wells Fargo team of analysts led by Jared Shaw wrote.

    The crypto bank's growth plans rely on a recovery in cryptocurrency markets or rapid stablecoin adoption, the note said, and its two main initiatives are the launch of stablecoin- and bitcoin-backed lending via its SEN Leverage platform.

    The analysts said, however, that with stablecoin regulation taking longer than expected and little news on the bank's planned launch, that initiative may prove to be a “significant drag” on profitability in the medium term.

    Upcoming quarters will be especially challenging for the stock as greater clarity is needed on the wider economy ahead of a crypto recovery, the analysts added.

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Author placeholder image

    Will Canny is CoinDesk's finance reporter.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.