Morgan Stanley Downgraded Silvergate Capital

Morgan Stanley has downgraded Silvergate Capital, becoming one of the first major Wall Street firms to express a firmly pessimistic opinion of the “crypto bank,” which has been a darling of analysts despite significant stock price losses, according to a CNBC report.

According to the analysts, Silvergate is facing significant uncertainty about deposit flows in the near term, with digital deposits down 60% so far in the fourth quarter compared to the third quarter.

As clients remove their deposits, the bank’s net interest margins, and net interest income are under pressure because it must fund withdrawals through securities sales and more expensive wholesale borrowing.

The Wall Street bank’s team, led by analyst Manan Gosalia, reduced Silvergate’s shares to underweight from equal weight but maintained its price objective of $24.

According to Morgan’s statement, the fall of FTX may lead to litigation and headline risk throughout the crypto sector.

Previously, Bank of America also announced the downgrade of Coinbase from buy to neutral.

Headquartered in San Diego as a California state-chartered bank, Silvergate Bank has been profitable for each of the past 24 years. It began pursuing digital currency customers in 2013 and have been deliberate in our approach to serving this community since then. Today, it has 1,300+ digital currency and fintech customers that are using our platform daily to grow and scale their businesses.

The bank is notable for its focus on cryptocurrency and distributed ledger clients — who comprise 90% of its assets — and it has been described as having a central role in the cryptocurrency system. It has built a real-time payments system called the “Silvergate Exchange Network” (SEN), which enables cryptocurrency exchanges, institutions, and customers to exchange fiat currencies such as US dollars and Euros.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Harold

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