Wednesday night, Silvergate Bank made it official that it intends to go into liquidation in light of its accumulating difficulties. Let’s also look back at the reaction of the cryptocurrency ecosystem to this announcement.
Silvergate seeks liquidation
The much-feared conclusion to the Silvergate affair appears to be looming, now that the bank has announced its intention to place itself into liquidation. This follows the numerous difficulties accumulated throughout 2022, which had accelerated in recent weeks.
Despite this, the company announced that its customers’ funds were safe, and that they should all be refunded:
In light of recent industry and regulatory developments, Silvergate believes that an orderly wind-down of the Bank’s operations and a voluntary liquidation […] is the best way forward. The Bank’s liquidation plan […] provides for the full repayment of all deposits. “
To ensure that the transactions went smoothly, Silvergate also brought in a number of experts, both financial with Centerview Partners LLC, and legal with Cravath, Swaine & Moore LLP.
Reactions from the ecosystem
The fall of Silvergate is the latest significant event in the crypto ecosystem during this bear market. This has led to the reaction of several players, especially to reassure their own customers. Indeed, Binance, OKX and Coinbase have for example indicated that their own operations were not impacted :
Update: We’re sorry to see Silvergate make the tough decision to wind down their operations. They were a partner and contributors to the growth of the cryptoeconomy. Coinbase has no client or corporate cash at Silvergate. Client funds continue to be safe, accessible & available. https://t.co/78oMrLQ6VH
– Coinbase (@coinbase) March 9, 2023
As for the Bitcoin (BTC) price, it has indeed fallen, but the impact remains measured. Indeed, after a peak of $21,600, the price is around $21,750 at the time of writing, which represents a drop of just over 2% since yesterday afternoon. It is therefore likely that the possibility of this scenario was already built into the price, notably by the stall last Friday:
BTC price in H4 data
On the regulatory side, the openly anti-crypto US Senator Elizabeth Warren did not fail to seize this opportunity to congratulate herself, calling for more and more regulation, and calling this event “predictable”:
As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I warned of Silvergate’s risky, if not illegal, activity-and identified severe due diligence failures. Now, customers must be made whole and regulators should step up against crypto risk.
– Elizabeth Warren (@SenWarren) March 8, 2023
While it is obviously unfortunate to see another major player in the industry fall, the momentary reaction of prices is interesting, assuming that such news could have caused a tidal wave. Nevertheless, it is important to remain cautious, and to observe the possible contagion that this new crisis could cause.
