Hello! Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.
Silvergate Capital Corp. shares SI,
Several crypto companies, including Coinbase, Galaxy Digital, Paxos and Circle, said they would cease all or part of payment transactions with the bank.
In this installment, I’ll break down what it means for the crypto industry.
You know the drill – find me on Twitter at @FrancesYue_ to share any thoughts on crypto, this newsletter or your personal stories with digital assets.
The Silvergate problem?
Brad Lamensdorf, co-portfolio manager of Ranger Equity Bear ETF HDGE,
Silvergate stock has lost over 97% of its value since it reached an all-time high at over $200 in November 2021, according to Dow Jones market data.
Lamensdorf said he has been bearish on Silvergate and some crypto native companies, namely because he thinks they won’t be able to compete with traditional finance heavyweights like Morgan Stanley MS,
The smaller, crypto-friendly banks “are trying to house a lot of value in a capital banking base that is incredibly unstable,” said Lamensdorf. “The whole industry is just not set up to properly work the way Morgan Stanley or Goldman Sachs would work right now.”
For now, concerns around Silvergate are forcing crypto companies to concentrate more on other platforms, according to Lamensdorf. Banks have been traditionally reluctant to work with crypto companies due to the lack of regulation, and it means that crypto companies haven’t had many options in terms of where to store their deposits.
If Silvergate goes under, it would “narrow the opportunities of businesses for crypto companies,” said Julius de Kempenaer, senior technical analyst at StockCharts.com.
Silvergate declined to comment beyond its Wednesday regulatory filing.
It might come to point where “you have 90% of everybody at one place, which is terribly dangerous because if that one place goes down, you don’t have any diversification,” according to Lamensdorf.
Signature Bank, a different crypto-friendly bank, saw its shares down 2.7% Thursday, according to Dow Jones market data.
Still, major cryptocurrencies seem to be holding up well Thursday, with bitcoin trading above $23,000 and ether at slightly below $1,650.
FTX co-founder pleads guilty
Nishad Singh, co-founder and former head of engineering at bankrupt crypto exchange FTX, reportedly pleaded guilty to six criminal charges in New York, including conspiring to commit securities and commodities fraud on Tuesday, according to several media reports.
Singh has also agreed to cooperate against his previous boss Sam Bankman-Fried, former chief executive at FTX, according to a report by The Wall Street Journal.
“Nishad is deeply sorry for his role in this and has accepted responsibility for his actions. He wants to do everything he can to make things right for victims, including by assisting the government to the best of his ability in this case,” Andrew D. Goldstein and Russell Capone, lawyers at Cooley LLP representing Singh, wrote to MarketWatch in an email.
Meanwhile, in a civil action, the U.S. Securities and Exchange Commission on Tuesday charged Singh with defrauding investors in his role at FTX, according to a complaint.
According to the SEC’s complaint, Singh created software code that allowed FTX customer funds to be transferred to Alameda Research, a crypto hedge fund owned by Bankman-Fried and Gary Wang, co-founder of FTX.
Cathie Wood roots for bitcoin
Cathie Wood, chief executive at ARK Invest, reiterated her support for cryptocurrencies such as bitcoin and ether on Monday, despite several digital asset companies collapsing last year and fresh signs that U.S. regulators want to tighten their control over the industry.
Wood called the Bitcoin network “completely decentralized and transparent,” but said bankrupt crypto companies FTX, Celsius and Three Arrows were “completely opaque and centralized,” in an interview with CNBC on Monday. “Those were the companies that went under,” she said.
Crypto in a snap
Bitcoin lost 2.3% in the past week and was trading at around $23,472 on Thursday, according to CoinDesk data. Ether edged up 0.2% in the same period to around $1,648.
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Crypto companies, funds
Shares of Coinbase Global Inc. COIN,
Crypto mining company Riot Blockchain Inc. RIOT,
Overstock.com Inc. shares OSTK,
Shares of Block Inc. SQ,
PayPal Holdings Inc.’s PYPL,
Advanced Micro Devices Inc. AMD,
Among crypto funds, ProShares Bitcoin Strategy BITO,
Grayscale Bitcoin Trust GBTC,