Moody’s Downgrades Silvergate Cryptocurrency Bank

03/04/2023 22:01 • Digital Disruptors • 127 views

According to reports, Moody’s, the rating agency, downgraded the long-term issuer rating of Silvergate, the US cryptocurrency bank, from B3 to Ca, and downgraded the company’s deposit rating to Caa1. Moody’s is still likely to further downgrade the company.

Moody’s downgraded Silvergate, a cryptocurrency bank

Analysis based on this information:

Moody’s, one of the leading rating agencies, recently downgraded the long-term issuer rating of Silvergate, a US-based cryptocurrency bank from B3 to Ca, and also lowered the company’s deposit rating to Caa1. This action reflects Moody’s concerns about the bank’s overall financial profile.

According to Moody’s, the downgrade was based on various factors that include the bank’s decision to finance cryptocurrencies. The rating agency cited the risks that surround this lending activity, which they consider as highly volatile and prone to significant fluctuations. The cryptocurrency market has been known to experience sudden surges or dips in value, which may have a significant impact on the bank’s exposure to such assets.

The agency also highlighted Silvergate’s high reliance on volatile, non-interest income sources, such as fees from cryptocurrency deposits and trading. Moody’s views this as a cause for concern, as the bank remains vulnerable to market swings in cryptocurrency exchange rates. A decline in the value of assets held in the bank could, therefore, negatively impact its overall liquidity and profitability.

The overall outlook of the cryptocurrency market remains uncertain, and Moody’s is still likely to further downgrade the bank’s rating, given the sensitivity of its business model to the volatile cryptocurrency ecosystem.

In conclusion, Moody’s decision to downgrade Silvergate’s rating reflects concerns about the bank’s exposure to risks associated with cryptocurrencies. The rating agency has identified the bank’s decision to finance cryptocurrencies and its high reliance on volatile, non-interest income sources as causes for concern. Given the overall volatility of the cryptocurrency market, Moody’s is likely to further downgrade the bank’s rating if it doesn’t take measures to address these risks.

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Moody’s Downgrades Silvergate Cryptocurrency Bank

Moody’s downgraded Silvergate, a cryptocurrency bank

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