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Silvergate Digital Currency Financial Service Company in Peril

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It is reported that Silvergate, a digital currency financial service company, plunged 35% before the market on Thursday. The company had previously warned that…

Silvergate Digital Currency Financial Service Company in Peril

It is reported that Silvergate, a digital currency financial service company, plunged 35% before the market on Thursday. The company had previously warned that due to the sale of a large number of assets, the capital was exhausted, and it would be difficult to repay the due loans, so it might not be able to continue operating. Silvergate also said that it was selling its securities portfolio to meet customers’ withdrawal requirements. However, the company said that the sale transaction had caused a loss of US $1 billion in the fourth quarter of last year, and the company also warned that the sale of these securities portfolios might cause more non-temporary impairment and further losses.

Silvergate, a cryptocurrency finance company, warned that it might not continue to operate

Interpretation of the news:


Silvergate, a digital currency financial service company, inflicted a massive plunge of 35% before the opening of the market on Thursday, signaling impending danger for the firm. The company had earlier indicated that it was on the verge of financial breakdown, given the sale of an extensive stock of assets, leaving the capital exhausted and unable to repay the due loans, thus making it challenging for the firm to continue operating. Silvergate had gone further to state that it was selling its securities portfolio to cater to the customers’ withdrawal demands. Nonetheless, the sale transaction created a loss of US $1 billion in Q4 of the previous year, prompting the company to forewarn that the sale of these securities portfolios may incur non-temporary impairment, thereby causing more losses in future.

The latest announcement comes as a shock to the investors who had previously exhibited optimism about the company, given its overall performance in 2020. Notably, Silvergate had recorded profits in every written financial report over the past year, with the most recent earnings recording a revenue of $5.3 million. The company’s strategy was backed by its stance on digital currency as a viable alternative to the traditional financial system. Its decision to enter the crypto industry gave the impression that it was a future unicorn.

The plunge of Silvergate has been attributed to several factors. Firstly, the company’s stocks were overpriced, given their value, particularly after the company’s announcement that it was selling its securities portfolio. The revelation affected the investors, causing them to dump their shares, thus leading to a massive drop-in stock prices. In addition, Silvergate’s failure to make profits from its crypto-related ventures, particularly in its decision to provide banking services to corporates engaged in cryptocurrency transactions, has negatively impacted its finances. The lack of profits forced the sale of its small portfolio of securities was an effort to maintain liquidity, which ultimately resulted in significant losses.

To conclude, Silvergate’s situation presents a clear warning to investors about the realities of the digital currency industry. It emphasizes the fact that the industry is still in its infancy and susceptible to various risks that could result in significant losses. Investors are advised to research thoroughly before investing in the rapidly growing digital currency space.

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