Silvergate CEO Predicts More Crypto Pain Over the Next Few Quarters

  • Silvergate restated that it plans to launch its stablecoin this year. The company bought meta’s stablecoin (Diem), its technology, and other assets earlier in the year.

Crypto-focused bank, Silvergate Capital, stated that the current bear market that is affecting all aspects of the crypto sector is not over. The bank also predicts that the bear market will persist for the next few quarters. 

In a recent interview, Silvergate CEO and ex-TradFi banker, Alan Lane, said some exchanges and crypto funds will still experience some level of pain in the next few quarters.

However, he was optimistic that it was only a matter of time before it was over. Then, everyone will need to wait for a new catalyst to signal the next bull run. Lane warned investors that there is a difference between the current crypto price decline and the previous one because of global crises in macroeconomics. 

Silvergate and the Crypto Market

Inflationary pressures due to rising rates and other macro trends have caused a sharp drop in the digital asset industry.

Despite gaining 33 percent in the last week, Silvergate shares are still down 42 percent this year. Similarly, the Vaneck Digital Transformation ETF, which gained 15 percent in the last seven days, is still down 67 percent this year. The ETF contains a variety of crypto stocks, such as miner Marathon Digital and Coinbase.

Investors’ fears over a possible recession due to aggressive rate increases have hurt global financial markets, especially stocks and cryptos. Many investors consider these two markets the riskiest. The tech-focused Nasdaq composite index has declined by 25 percent over the last 12 months.

Analysts had predicted a poor quarter performance by most crypto firms (including exchanges and miners) as the crypto winter intensifies further. However, Silvergate’s good performance for the last quarter was a complete deviation from the norm.

Compared to its 2021 second-quarter earnings, US dollar transfers on the Silvergate exchange network for Q2 2022 rose by 34 percent. However, its net income surged by 85 percent within the same period. Lane said Silvergate stuck to its area expertise and wasn’t chasing FOMO. Hence, it was able to avoid pitfalls in the current bear market.

“We ensured we remained focused on what we do well and not go after any new fad. That means providing solutions to our customer’s problems.” In his note to their clients, equity research analyst at Canaccord Genuity, Joe Vafi, wrote that the biggest long-term positive of Silvergate’s success was implementing a risk management program that included no loan write-downs.

They stuck with this plan despite the default crisis affecting the wider ecosystem and huge price swings of digital assets. Vafi also predicts that Silvergate will likely double its earnings in the next couple of years. He made this prediction because the company is embarking on multiple growth drivers.

Silvergate’s CEO remains optimistic about using bitcoin for the company’s lending program despite the recent crash of various over-leveraged crypto lending firms. Lane said the company is sticking with bitcoin because it is some of the best lending the company has ever done. Hence, they want to continue with that trend.

Recently, Silvergate offered a $205 million term loan to MicroStrategy under its sen leverage program. Thus, the Michael Saylor-owned company could increase its bitcoin holdings. On a recent earnings conference call, Silvergate restated that it plans to launch its stablecoin this year. The company bought meta’s stablecoin (Diem), its technology, and other assets earlier in the year.

Rebecca Davidson Verified

Rebecca is a Senior Staff Writer at BitcoinWisdom, working hard to bring you the latest breaking news in the cryptocurrency market. In the words of Elon Musk “Buy stock in several companies that make products & services that *you* believe in. Only sell if you think their products & services are trending worse. Don’t panic when the market does. This will serve you well in the long-term.”

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