Silvergate Capital, a crypto state-chartered bank based in California, has received a bullish rating from Wells Fargo, which initiated coverage on the digital asset company with an overweight rating based on rising interest rates and prospects for further growth in its exchange network.
In a note, Jared Shaw, a Wells Fargo analyst, stated that Silvergate provides an opportunity for investors. The report further mentioned that the ongoing institutional adoption of cryptos and product innovation should help maintain Silvergate Capital’s (SI) growth profile.
Shaw wrote in a note that the current bear market makes an attractive entry point for institutions investing in cryptocurrencies. “As rates rise, higher spread income will come from a zero-cost deposit base, and further growth in SEN Leverage and the rollout of an SI-issued stablecoin payments network represent future opportunities,” the report stated.
Wells Fargo mentioned that the market is in the early stages of cryptocurrency and blockchain adoption. The note said that Silvergate offers a regulated and FDIC-insured platform for investors looking to on-ramp and off-ramp U.S dollars into the digital asset ecosystem.
The analyst pointed to Silvergate’s (SI) as the “biggest driver of deposits” and digital customer growth, as its client base has been growing at a 35%-40% rate year on year since 2019. The note further pointed out that Silvergate has developed a strong network impact via its Silvergate Network (SEN), which is used by some of the leading exchanges and institutions in the digital asset space. The report also stated that Silvergate plans to launch its own U.S.-based stablecoin payments platform late this year, unleashing new potential revenue opportunities.
The note stated that it “should drive much of the bank’s near-term profitability, as 77% of assets are securities (55% floating) and the loan book is also heavily floating-rate,” the note stated.
Wells Fargo’s view contrasts with its peers like Morgan Stanley, which gave Silvergate an equal weight rating last week.
Bitcoin Crashes Again
Wells Fargo’s ‘BUY’ rating for Silvergate comes despite the renewed crypto crash triggered by crypto lending platform Celsius’ pause on all withdrawals, swaps, and transfers between accounts due to “extreme market conditions.” Shares of Silvergate dropped more than 17%, and other crypto-focused stocks such as MicroStrategy and Coinbase collapsed during premarket trading on Monday as Bitcoin price plunged below $24,000 per coin.
Three weeks ago, the crypto market saw another worse selloff, exacerbated by rising interest rates and TerraUSD losing its peg to $1 and eventually leading to the collapse of both the stablecoin and Terra (LUNA).
Volatility continues to be the norm in crypto coins, and the latest fall witnessed on Monday is another reminder of that. But what is being done by payment systems and digital projects will continue to stabilize the market long term.