Silvergate has an intriguing bank model. Silvergate pays almost nothing on its deposits (liabilities) so earns an unusually high spread on the securities it invests in (assets). The Silvergate Exchange Network (SEN) connects the different crypto platforms (FTX, Coinbase, Gemini) so the growth of crypto trading has enabled Silvergate’s deposits to grow rapidly. Because they don’t pay interest on the deposits and earn a spread by investing those deposits, their revenue is grown rapidly despite a very low loan/deposit ratio.

It is interesting how correlated the stock prices is with BTC. They clearly benefit from increased trading volume in crypto, so my guess is that the stock will remain fairly correlated with crypto prices in general.

They also have crypto-lending and stable coin ambitions, having recently purchased Facebook/Meta’s crypto IP. Perhaps a big opportunity there, albeit with greater risks.

Any thoughts?
JT

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