Shares of Silvergate Capital ( SI ) fell on Friday morning in a sign that FTX’s rapid meltdown continues to roil investors.
On Thursday, Silvergate CEO Alan Lane sought to reassure investors that the market volatility caused by the FTX collapse would not affect the crypto banker’s business.
“Suffice it to say, whether deposits are up or down, we have the liquidity and capital ratios to support volatility,” Lane said at the Oppenheimer Blockchain and Digital Assets Summit.
But his message appeared to fall flat as the company’s share price fell nearly 10% on Friday. More broadly, shares of Silvergate Capital have fallen 85% since last year’s crypto bull run.
Hours after Lane’s remarks, crypto intermediary FalconX announced it would not use Silvergate SEN Leverage, which allows institutional investors to trade any asset on a leveraged platform backed by bitcoin or USD, “out of an abundance of caution.” It will also not use the crypto banker to make bank transfers.
Last Friday, Silvergate announced that it has no outstanding loans or investments to FTX and clarified that FTX is not a trustee for any of its bitcoin-backed SEN Leverage loans. FTX does have at least $1 billion in deposits at Silvergate, but the bank says that represents less than 10% of its total deposits from all digital asset clients.
Both institutional and retail investors are on edge after the FTX collapse as they try to predict the effects of a third market-disrupting contagion on the crypto market and the crypto industry as a whole. The first two infestations were precipitated by the collapse of Terra-Luna in May and the implosion of Three Arrow Capital in June, respectively.
Mark Kohodes, an early critic of FTX, says FTX deposits at Silvergate still represent a significant percentage of the banker’s total deposit base. On Tuesday, Cohodes told Hedgeye he was shorting Silvergate, noting the amount of FTX deposits in the bank is a huge red flag.