|March 9, 2023||View Online|
Silvergate is throwing in the towel while 50,000 bitcoin linked to the Silk Road are on the move. We've got all that and more in today's newsletter.
Let's dive in!
Silvergate is winding down
It looks like the writing was on the wall for Silvergate and the inevitable has happened...
Just a week after we reported that the crypto bank was "less than well-capitalized," Silvergate Capital is calling it quits.
In a statement put out after yesterday's market close, the company said they'll "wind down operations and voluntarily liquidate the Bank in an orderly manner and in accordance with applicable regulatory processes."
Yet another fallout from the crypto bear market
As the dominos fell across the board in 2022, Silvergate also felt the heat. The popular bank that facilitated payments for over more than 750 crypto clients at its peak faced a massive drop in customer deposits and a liquidity crunch, in a similar fashion to what happened with FTX.
In November of last year there was speculation that the company could be facing a bank run in the wake of all the bankruptcies and collapse of the crypto markets.
And just last week, Silvergate disclosed that it was being investigated by regulators and that the future of the company in the next 12 months was uncertain.
This was the final nail in the coffin for Silvergate as many large clients decided to end their relationship with the bank over the concern of their insolvency and regulatory troubles.
Silvergate has just over $11 billion in assets and plans to reimburse all deposits to its customers in whole.
US Gov moves $1b of bitcoin linked to Silk Road seizure
In November 2021, the U.S. government seized over 50,000 bitcoin in connection with the Silk Road.
Turns out a guy by the name of James Zhong had hacked the darknet market way back in 2012. And then when the feds caught up to him, he coughed up his seed phrase in exchange for a lighter sentence.
Since then, the coins have been quietly sitting in cold storage.
That is until now...
In a tweet posted by on-chain metrics company Glassnode, they revealed that 40,000 bitcoin have moved from wallets associated with US Government law enforcement seizures.
Shortly thereafter, PickShield reported much of the same.
Where are they headed?
That's the question that everyone wants to know...
If the US government were to auction off or liquidate $1b worth of bitcoin, it could definitely put some downward pressure on the price.
But here's the good news...
The majority of the coin movements appear to be internal transfers so there's no need to panic... yet.
However, it looks like 9,861 bitcoin ($217m) have been sent to Coinbase. If that's the case, it's possible that those coins may be looking for a new home.
Ready for auction?
If the coins sent to Coinbase are going to be auctioned off, it wouldn't be the first time.
The U.S. government has already auctioned off a significant portion of the bitcoin seized from Silk Road back in 2013. In fact, a total of 173,991 BTC were sold off in auctions conducted by the U.S. Marshals Service in 2014 and 2015.
These auctions were highly anticipated and closely watched by the crypto community, as they represented one of the largest sales of bitcoin at the time.
For now, we'll continue to monitor the movement of the coins and what kind of impact they might have on the market.
What else is sprouting
That's it for today!
We hope you enjoyed this newsletter and we'll catch you in your inbox tomorrow 👋