Silvergate posts $1 billion loss as crypto industry suffers a 'crisis of confidence'

Crypto-focused bank operator Silvergate reported a more than $1 billion net loss for the fourth quarter as the sector suffered a "crisis of confidence." 

Silvergate posted a net loss of $1.05 billion for the quarter, compared with an $18.4 million profit in the same period a year earlier, according to a statement. The company reported a $751 million loss on securities and a $135 million impairment charge related to the estimated $1.7 billion of securities it expects to sell in the first quarter of 2023 to reduce borrowings.

"The digital asset industry experienced a transformational shift, with significant over-leverage in the industry leading to several high-profile bankruptcies," the company said in the statement. "These dynamics created a crisis of confidence across the ecosystem and led many industry participants to shift to a 'risk off' position across digital asset trading platforms."

Silvergate shared preliminary fourth-quarter results on Jan. 5. The figures showed customer deposits fell by 68% in the three months ending Dec. 31, to $3.8 billion from $11.9 billion. Average customer deposits also fell, dropping by $4.7 billion during the quarter to $7.3 billion. 

The firm also cut 40% of its staff at the time, citing the crisis of confidence across the ecosystem. The bank cited "economic realities" that face the industry and the firm, adding the reduced headcount will help the firm manage expenses in a "more challenging macro environment."