Crypto Fallout Claims Another Banking Victim: How The Industry Is Reacting

Zinger Key Points
  • Experts expect the industry to suffer from short-term issues such as increased trade slippage.
  • 'Innovative companies will become pioneers in the new banking order.'

Silvergate Bank SI was once a key financial partner for the cryptocurrency industry. Now, it's set to wind down operations and liquidate.

The California-based bank had been considered a critical player in the crypto industry by providing financial services to companies like Coinbase COIN and FTX FTT/USD, which led to a significant increase in its share price.

Some 90% of its deposit base came from crypto companies. And as the market experienced a downturn, Silvergate suffered significant outflows, with $8.1 billion in digital asset deposits lost in Q4 of 2022 alone.

See Also: The Shocking Truth About Crypto - Why Governments Are Terrified Of Decentralized Networks

The collapse of FTX, one of Silvergate's key clients, only made matters worse. The price of cryptocurrencies like Bitcoin BTC/USD, Ethereum ETH/USD, and Dogecoin DOGE/USD spiraled.

The development has caused some concern in the cryptocurrency industry, with experts predicting potential short-term issues.

Speaking with Benzinga however, they also agree that the market will adapt, and other players will rise to take Silvergate's place.

According to Brighty CTO Nikolay Denisenko, "The Fear, Uncertainty, and Doubt surrounding Silvergate Bank are unhealthy for the crypto industry. While there is no doubt that the market has been operating around two giants, Signature and Silvergate, I think many alternative market players will rise in the long run."

He believes that innovative companies will become pioneers in the new banking order.

Przemyslaw Kral, CEO of Zonda, said that without these critical banking rails, we expect the industry will suffer from short-term issues such as increased trade slippage.

“However, with the extensive backing that the industry enjoys, we're sure it won't be long before the shoes of Silvergate are filled,” Kral said.

Finery Markets CEO Konstantin Shulga noted that the crypto industry has been around for over a decade, and traditional banks have refused to engage with crypto companies due to a lack of clear rules.

The industry will continue to thrive, regardless of what happens to Silvergate, he says, adding that increased clarity on rules and regulations would enhance the number and quality of banking relationships for crypto firms.

Next: 10 Crypto Scam Warning Signs: When Promises Don't Deliver ... Or Worse

Photo via Shutterstock.

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