Here’s what’s going to happen for cryptocurrencies in the short and medium term, according to this famous crypto CEO





The bear market hitting every corner of the digital asset industry is not over and may see even more pain in the coming quarters, according to cryptocurrency-focused bank Silvergate Capital (SI).

The crypto industry may see a few more pain points for some crypto exchanges and funds in the coming quarters, “but at some point, all that will happen, and then we’ll just wait for what the next catalyst will be,” he said.TradFi CEO and former banker Alan Lane told CoinDesk in an interview.

However, investors should not compare crypto’s current price decline with previous ones given the broader global economic reset, as digital assets have fallen along with macro trends, including rising rates and inflationary pressures, Lane said.

Silvergate shares are down 42% this year, though they are up 33% in the past week. The VanEck Digital Transformation ETF (DAPP), which contains a basket of several crypto stocks, including the exchange Coinbase (COIN) and miner Marathon Digital (MARA), is down 67% this year but is down 15% in the past. increased. . Rising interest rates and fears of a recession are hurting global equity markets, especially those considered riskier. The tech-heavy Nasdaq Composite Index is down about 25% so far.

Given the cryptocurrency slowdown, analysts are forecasting a weak quarter for several cryptocurrency companies from exchanges to miners, but Silvergate’s second-quarter results reversed the trend.

The Silvergate Exchange Network (SEN), a fiat-on disaster for bitcoin markets, saw a 34% increase in US dollar transfers in the second quarter compared to a year ago, while net sales increased year-over-year. grew by 85%.

According to Lane, Silvergate has avoided the pitfalls of the bear market by sticking to what the bank does best and not going after FOMO. “We’re really trying to stay in line and not chase the latest fad, but focus on what we’re doing right, basically solving our customers’ problems,” Lane said.

Investment bank Canaccord Genuity believes risk management has been a key factor in Silvergate’s positive results. “Perhaps the biggest long-term bright spot in history was a risk management program that resulted in no loan write-offs, despite significant volatility in crypto spot currencies and some default contagion in the wider ecosystem,” Canaccord equity research analyst Joe Vafi said in a note to customers.

Vafi also expects Silvergate to double its revenues in the coming years, given the various growth engines the company has deployed. He values ​​the stock with a buy and price target of $200; shares closed Friday at $86.50 apiece.

Amid the recent collapse of several cryptocurrency-linked and overleveraged financial institutions, Lane remains in favor of using bitcoin for its lending program.

“We are definitely still interested in lending against bitcoin,” Lane said. “We think it’s one of the best loans we’ve ever made, and we want to keep developing it.”

More recently, Silvergate used its SEN Leverage program in a $205 million term loan to Michael Saylor’s MicroStrategy so that the business intelligence firm could buy more bitcoin.

Lane said the lending platform was built knowing it would have volatility, and says the recent cryptocurrency trail has been a good stress test for Silvergate to show it can withstand volatility in its lending business model.

Among the lenders that have had problems are those that offered customers unsecured or collateralised loans, while Silvergate requires too much collateral, according to Lane. If market headwinds persist, a borrower can repay their loan, pledge more bitcoins as collateral, or Silvergate can make the decision to liquidate bitcoins on their behalf if necessary.

In January, Silvergate bought the technology and other assets from Diem, the stablecoin project from Meta Platforms (formerly Facebook) first announced as Libra in June 2019.

“While details remain scarce, the Van Diem acquired assets do indeed provide a strong platform for a stable currency for e-commerce, and we can only believe that demand from both payment platforms and merchants could be strong over time.” added Vafi of Canaccord in her letter to customers.

Silvergate said during its earnings conference that the stablecoin launch this year remains on track.

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ThomasE.
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