Jim Cramer explains Silvergate’s failure on Mad Money

  • Shares down more than 90% from November 2021 high
  • Silvergate is “a fine example of all the problems in this industry.”
  • They were working on MMF, the most dangerous link in the crypto chain

Jim Cramer talked On CNBC’s Mad Money, why Silvergate is a “crucial” part of the cryptocurrency ecosystem.

Silvergate’s stock price plummeted, dropping more than 43% yesterday and dropping another 2%. He’s down more than 90% from all-time highs in November 2021. The collapse of the cryptocurrency industry caused deposits to fall behind, the bank said, laying off 40% of his staff, selling assets and suffering heavy losses. Silvergate held FTX units and Alameda deposits.

stocks are always cheaper

According to Cramer, stock prices can always go down, and as long as they stay above zero, that’s fine. But Silvergate is an important part of the crypto ecosystem and it’s a “great example of what’s wrong with this industry.” Kramer said:

Banks made a series of terrifying disclosures that caused (dramatic declines). If we don’t respond, I’m worried that our market capitalization will shrink to the point where we won’t be able to talk about it on the air.

History of Silvergate Bank

Silvergate Bank was founded in 1988 as a savings and loan association. It was turned into a bank in 1996 by Dennis Frank and Derek J. Eisele. At first, in Southern California he was a very small company with only three branches.

In 2013, CEO Alan Lane made a personal investment in Bitcoin and the bank entered cryptocurrency. They have launched their services to the crypto space, specifically crypto exchange companies. According to Cramer, it was a very early move that most banks didn’t want to have anything to do with Bitcoin. Then, it was “really only Bitcoin”.

Silvergate has grown rapidly since then, reaching $1.9 billion in assets by 2017. The company went public in November 2019 with a stock price of $13. The price he rose 1580% in November 2021.

why did they fail?

As previously mentioned, the price has come down more than 90% since then. Kramer explains:

Silvergate founded the Silvergate Exchange Network (SEN), a payment network for the crypto space. Send USD to other Silvergate customers instantly, 24/7, just like trading cryptocurrencies. Banks also offered loans with Bitcoin as collateral. They were working on their own stablecoin, a pseudo-money market fund (MMF) that could enter and exit the market without friction, the most dangerous link in the cryptocurrency chain.

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