The Largest Crypto Bank just went Bankrupt, what happened? | Silvergate Bank

The problem arose following the collapse of FTX, Silvergate faced a significant decrease in digital asset deposits, necessitating a balance-sheet restructuring and prudent policies to withstand potential bank runs. The organization took steps to ensure liquidity and accommodate deposit inflows and outflows. Silvergate reduced its workforce by 40%, adjusted its expenses, reviewed its product offerings and customer relationships, and implemented cost-cutting measures.

The management of Silvergate believed it had prudent policies in place to ensure the safety and accessibility of its deposits. The management team stated that the balance sheet was designed to withstand a 70% drawdown on deposits and that cash reserves exceeded all remaining deposits. However, on many levels, this was not enough

Silvergate invested a portion of its crypto-related deposits in mortgage-backed securities and bonds issued by state and local governments, the value of which fell as benchmark interest rates rose. Clients rushed to withdraw money when crypto markets crashed in 2022 and exchanges such as FTX went bankrupt. Silvergate had to sell securities to cover the withdrawals, incurring a loss of more than $1 billion and hastening its demise

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