Jan 5 (Reuters) – Silvergate Capital Corp (SI.N) reported on Thursday that cryptocurrency-related deposits dropped sharply in the fourth quarter, with around 39% pre-market.
The crypto-focused bank also said it would cut its workforce by 40%, or about 200 jobs, in an attempt to keep costs down amid a deepening industry recession.
A dismal preliminary earnings report shows the extent of the fallout of FTX, which filed for bankruptcy in November after failing to cover customer withdrawals, and the extent of its impact on the digital asset industry, one of the world’s biggest cryptos. It shows a surprising reversal of fortunes in what was an exchange.
Silvergate previously said it had no outstanding loans or investments in FTX, but the company’s stock has lost 69% of its value since the exchange meltdown that sparked the cryptocurrency crash.
Thomas Hayes, chairman and managing member of investment firm Great Hill Capital, said: “When it comes to bad news related to cryptocurrencies and cryptocurrency-related businesses, it’s time to ‘shoot first, ask questions later. There is,” he said.
“We expect this carnage to continue for some time, as we have no way of valuing the underlying assets.”
Rising interest rates last year also crushed the industry, wiping out more than $1 trillion in value.
La Jolla, Calif.-based Silvergate, which has slowed its business expansion, has also delayed the launch of its blockchain-based payment solution.
An impairment charge of $196 million was incurred in the fourth quarter on assets purchased from Meta Platforms Inc-backed Diem Group for its payment solutions venture.
Total customer deposits for digital assets fell from September to end-December to $3.8 billion. The company sold its $5.2 billion bond in the fourth quarter at a loss of $718 million to maintain liquidity.
Reported by Manya Saini and Nikhet Nishant of Bengaluru. Edited by Subhranshu Sahu
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