Things just keep getting worse for Silvergate Capital...

On Wednesday, the crypto bank had to delay their annual report and they warned investors that the company is "less than well-capitalized."

The market response?

They dumped the stock and sent shares plummeting over 50%.

Clearly, not a good day to be a Silvergate shareholder 😬

How we got here...

If you've been a subscriber since the start of the year, you'll remember that we covered Silvergate's Q4 troubles back in January.

At the time, the company was reeling from all the crypto contagion that wiped out some major players in the industry. In response, they were forced to sell debt securities at a loss to make sure there was enough liquidity on hand to meet customer withdrawals.

When all was said and done, the company ended up with a whopping billion dollar loss for the quarter!

Fast forward to today and it looks like the company is still hurting pretty bad.

Here's what JPMorgan analyst Steven Alexopoulos had to say about the situation:

"The losses from the securities sales appear large enough to result in Silvergate calling out that it may now be less than well capitalized on its regulatory capital ratios. Given significant regulatory challenges (including the pending investigations from regulators) and business challenges (including the exacerbating liquidity challenges amid a crisis of confidence from digital asset customers), the company is reevaluating its businesses and strategies."

Yeah, not looking good...

Customer fallout

Now the stock price falling is one thing... but the bigger story is the number of customers who are jumping ship.

Shortly after the news broke, Coinbase tweeted out:

"In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate."

Circle, Paxos, and Gemini are some of the other heavy hitters who are also moving on to greener pastures.

And with so many companies hitting the eject button, you've gotta wonder about the longterm viability of the Silvergate...

Moving forward

Coinbase and many others will be taking their business over to Signature Bank, one of the few U.S. banking partners available to crypto companies.

And although we hope that healthy competition continues to exist, the current regulatory clampdowns are likely to make it tough on banks that want to service the crypto industry.

The Bankless boys are getting into the venture capital game...

According to CoinDesk, the hosts of the popular crypto podcast are starting a crypto VC fund to invest in seed-stage Web3 companies. David Hoffman, Ryan Sean Adams, as well as Ben Lakoff will be general partners in the new fund and will take part in the organization's investment committee.

The newly-formed Bankless Ventures will be a separate legal entity from the Bankless podcast, but will share its brand and likely benefit from the platform's reputation as a leader in crypto media.

A rapid rise to fame

Bankless was founded in 2020 by Ryan Adams and David Hoffman and has quickly become a major force in the world of crypto media. The brand includes a podcast, newsletters, a YouTube channel, and a decentralized autonomous organization (DAO) with its own BANK governance token.

As of December 2022, the Bankless podcast had surpassed 30 million downloads and its newsletter has more than 250,000 subscribers.

From media company to investment firm

It's not the first time the Bankless has leveraged their brand to get involved in crypto investment deals. Back in November of last year, Adams and Hoffman announced that it had acquired DeFi software project Earnifi under a sister organization called Bankless Labs.

However, once the fund launches with capital from outside investors, all private venture deals will be put on hold and everything will run through the fund.

When asked about the new fund, Lakoff mentioned that the trio has been angel investors in crypto companies individually for years and "now we're putting all that time and energy into Bankless Ventures to accelerate the bankless movement and are able to bring along select LPs to participate."