Shares of crypto-friendly bank Silvergate (SI) dropped 14% on Tuesday, hitting a new two-year low and underperforming most crypto assets on Tuesday as new FTX CEO John J. Ray III testifies before the House Financial Services Committee.
Silvergate was deeply involved with FTX before its collapse. Earlier this month, the San-Diego-based bank issued a statement saying it was the “victim of FTX’s and Alameda Research’s apparent misuse of customer assets and other lapses of judgment.”
Deposits by the crypto exchange made up nearly 10% of Silvergate’s $11.9 billion in deposits from digital asset customers, the bank disclosed in November.
Because of its relationship to the now-failed exchange, traders are looking for more answers about just how significant the collapse of FTX is for Silvergate and hope that maybe during Tuesday’s hearing, they will get more information.
“Traders don't want to hold Silvergate Capital this week as fears that any testimony from FTX could be damning,” said Edward Moya, senior market analyst of the Americas at Oanda. “Lawmakers are trying to find out everything that went wrong with FTX and some of that could spill over to Silvergate. Everyone wants to know if and how Silvergate played a pivotal role in the transferring of customer funds from FTX to Alameda. Any companies with ties to FTX will likely come under tremendous scrutiny.”
Shares of Silvergate dropped to a fresh two-year low of $18.03 on Tuesday, down nearly 90% year to date and over 30% in the past month. The last time SI was trading at this price was in October 2020.
The bank recently received a letter from Senators Elizabeth Warren (D-Mass.), John Kennedy (R-La.) and Roger Marshall (R-Kan.) demanding answers over its supposed role in facilitating transfers between bankrupt exchange FTX and its sister firm, Alameda Research. Silvergate has until Dec. 19 to respond to the senators.
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