At the time of writing, the share price for Silver Gate Capital Corporations (SI) reached $19.14, a 0.41 increase in share price and a 2.16% increase overall in the last 24 hours. The stock price has mostly trended downwards in December, and it doesn’t look like it’s stopping. The current price of $18 is a far cry from the $155 price of early 2022.
Let’s analyze Silvergate’s past performance and current value to see what the future holds.
Technical Analysis
In Wednesday morning trading, Silvergate Capital (NYSE:SI) stock gained 2.1% and rose to $19.6, but it continued to plummet shortly after. After crypto exchange FTX (FTT-USD) declared bankruptcy on November 11, the stock of Silvergate Capital (NYSE:SI) fell by almost 46%. In addition, the stock has lost over 86% in the past year, thanks largely to its association with crypto and a bearish market.
The association with FTX has been particularly brutal for FTX, as several senators have reached out to Silvergate to inquire further about its involvement with FTX.
Silvergate’s crypto associations have meant the stock of the company thrives when the cryptomarket is at its best, but plummets when it’s the other way around.
Silvergate’s stock performance during December. Chart by Yahoo Finance.
The FTX association throws a large shadow over Silvergate, as investors and traders are looking to hold or sell over fears that any revelations in the FTX case and Sam Bankman-Fried’s hearings could send the stock plummeting even further.
As such, it’s hard to offer an analysis of the stock’s price considering uncertainty that overshadows any performance indicators.
We don’t have to look any further than the fact that even under a bullish stock market, the stock still underperformed overall. All mostly due to the FTX situation. Even Bitcoin and Ethereum grew while Silveragate fell.
Currently, JPMorgan qualifies the stock as “overweight”, but it lowered its price target from $50 to $30.
A new two-year low was reached for Silvergate Tuesday as the stock closed at a downtick of 11.9%. The stock trades at just 5.5 times trailing earnings and 3.2 times free cash flows, which are numbers you would normally see on failing institutions.
Despite this, Silvergate’s support for trading is sorely needed by the crypto sector, especially as a bridge between crypto and fiat currencies. The stock is risky right now, and we still need to see how Silvergate handles the questions from US senators about its association with FTX.
However, if Silvergate manages to navigate these shark infested waters, it will most likely turn things around during 2023, particularly if the crypto sector grows in general.
Silvergate Analysis Conclusion
Like all crypto-adjacent properties, Silvergate Capital was significantly hurt by the FTX collapse, but it was doubly so in their case due to their direct association with FTX. As it stands, the stock continues to go down and it doesn’t look like it will stop. It’s hard to recommend a position with such a nebulous outlook. If Silvergate survives the coming days of FTX hearings, and its own response to the association allegations, it could turn things around in 2023.
What Does Silvergate Capital Corp Do?
The Silvergate Capital Corporation is a holding company for the Silvergate bank and operates as a financial institution for the digital industry. Providing financial infrastructure solutions and services for the digital currency industry, the Bank is a provider of financial infrastructure solutions. With its Silvergate Exchange Network platform, the Company offers payments, lending, and funding solutions to a growing class of digital currency companies and investors. Commercial banking, residential and commercial real estate lending, mortgage warehouse lending, and commercial business lending are some of the financial services the Bank provides. Additionally, the Bank offers a full range of deposit products and services.
How Does Silvergate Capital Make Money?
In Q2, Silvergate reported deposits of $13.8 billion. Interest payments on these deposits contributed $70 million to Silvergate’s bottom line. Overall, Silvergate brought in $80 million in the quarter, so receiving interest on deposits is the company’s primary source of income right now. Unlike other banks, Silvergate does not pay interest on its trading accounts.
For Silvergate, rising interest rates have a silver lining despite being negative for crypto. With $13.8 billion in deposits, the bank makes more money with higher interest rates. Tony Martino, Silvergate’s CFO, estimates that every quarter percent increase in interest rates will increase earnings by $16 million.
WeInvests is a financial portal-based research agency. We do our utmost best to offer reliable and unbiased information about crypto, finance, trading and stocks. However, we do not offer financial advice and users should always carry out their own research.
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