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LedgerX abandons Silvergate as analysts reduce stock value

LedgerX abandons Silvergate as analysts reduce stock value

Analysts at Kaiko say that Silvergate’s share price “moved in line” with bitcoin’s for “most of 2021-22.”

FTX’s LedgerX told its customers that it will no longer accept wire transfers from Silvergate Capital. This is the only part of the now-defunct exchange that was not affected by its bankruptcy or problems with regulators.

In an email sent to clients on Wednesday, LedgerX told them that beginning March 1, they should use Signature Bank instead of LedgerX for wire transfers.

“Silvergate made a name for itself as the bank of choice for some of the largest crypto companies, most notably working with FTX, which accounted for around 10% of crypto-linked deposits,” research analysts from Kaiko wrote in a recent note.

The change occurs during a difficult time for Silvergate. In the aftermath of FTX’s collapse, customers withdrew more than $8 billion from the bank, but Silvergate was able to survive by selling assets at a loss, with assistance from the Federal Home Loan Bank, a lender supported by private capital that provides lines of credit to distressed companies.

Silvergate held $4.3 billion in short-term Federal Home Loan Bank advances at the end of 2022. Silvergate’s stock, which rose momentarily at the end of January, is now down more than 20% since the beginning of the year.

“Due to its large crypto exposure, Silvergate’s share price moved in line with BTC returns for most of 2021-22. However, its correlation has weakened significantly in 2023 due to growing legal and regulatory risks around the bank’s dealings with FTX and Alameda,” Kaiko analysts added.

LedgerX, which was acquired by FTX’s US company in October 2021, has been conspicuously absent from FTX’s bankruptcy filings and other legal proceedings. Since its 2017 registration with the CFTC, LedgerX has escaped unscathed.

Regulators used the subsidiary as an example of a crypto company that should register with the proper authorities.

“We require, in permitting LedgerX to operate, that LedgerX comply with a number of conditions,” CFTC Commissioner Kristin Johnson said in a November appearance after the FTX collapse. “Not $1 of customer assets have been compromised, to the best of our knowledge.”

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