It seems that the situation for Silvergate Bank, the bank of the cryptocurrency world, is getting worse and worse. Cathie Wood’s Ark Invest is selling the bank’s shares en masse and, to top it off, Moody’s has also downgraded the bank’s credit rating.
Shares for sale
Ark Invest, the investment vehicle of Cathie Wood, has sold more than 400,000 shares in parent company Silvergate Bank. That sale raised $4.3 million, leaving Ark Invest with just 4,000 shares. It is clear that the bank is not doing well, because in one year the shares have lost about 90 percent of their price value. With that, it performed even worse than Bitcoin.
Moody’s Investor Service also reacted to the bank’s situation by heavily downgrading Silvergate Bank’s ratings. Client assets aren’t very safe with Silvergate, according to Moody’s, and the bonds of both the bank and Silvergate Capital aren’t worth it, according to the auditor.
Bank problems?
Of course, Moody’s also had an explanation for the bank’s downgrade. Too bad, according to the evaluator, that bank deposits are decreasing, that there are losses on the sale of securities and that staff have to be fired. “All of the bank’s assets come from the cryptocurrency industry and while the bank has sufficient liquidity and capital, a continued large outflow of assets would negatively impact the financial health of the bank,” said Sadia Nabi, the bank’s vice president by Moody’s.
Silvergate Bank lost $718 million as it had to liquidate debt securities to cover $8.1 billion in withdrawals. In addition, it has had to lay off 40% of its employees, which amount to about 200 people. Furthermore, cryptocurrency-related deposits on the platform decreased by 68% in the fourth quarter of 2022. The bank is also under pressure, as it has facilitated transactions between FTP extension and its subsidiary Alameda Research.
