As crypto trading volumes declined sharply in the first quarter of the year, investors were forecasting a forecast for the first quarter. The bank Silvergate Capital (SI 19.11%) Much of the core business model was related to the crypto spot trading volume of the platform. However, while volumes in the first three months of the year were weak, Silvergett not only hit quarterly earnings estimates well, but also showed that the bank could grow even if conditions in the broad crypto market were not necessarily favorable.
Developing the ecosystem
SilverGate launches a real-time payment system called Slvergate Exchange Network (SEN), which allows multiple components in the network to quickly clear and resolve payment transactions. SEN is especially helpful for institutional crypto traders and cryptocurrencies because the US payment system does not work instantly when cryptocurrencies are traded day and night. Considering the size of the SEN, which runs the Silververgett overall business model, is related to the crypto spot trading volume, I did not know exactly what to expect for the quarter. However, as the volume of transactions in SEN decreased in the first quarter, the bank continued to grow and SEN showed still a lot of interest.
SEN turnover reached just $ 142 billion in the quarter, the lowest in the last five quarters. But Silvergett has added 122 new digital currency customers to SEN in Q1, the most in the last five quarters. Silvergate was the first bank to offer such an instant payment platform, which was the first to be launched. As the network grows, it will be even more exciting for more companies to join because there are so many connected parties.
Silvergett CEO Allen Lane: The volatility in crypto currency will not affect customer growth on the platform because passenger companies may take longer to access the network and merging companies will take a long look at secret currencies. Lane also said that low crypto prices should actually attract more customers because it is a better chance of getting into crypto if you miss one of the previous boom, but it really doesn’t work.
Also in the quarter, Silvergett increased its SEN Leverage production, securing the US dollar credit line BitcoinA.D. By the end of 2021, the total budget for the first quarter of 2022, from $ 571 million to $ 1.1 billion. The quarter included a $ 205 million loan to Macro Strategy for the company’s division. Micro Strategy, Buys and holds Bitcoin. SEN Leverage Bitcoin: Allows large companies to share their Bitcoin in US dollars that they can use to expand their business, making them more capital-saving. This issue appeared to be strong against weak quarterly crypto trading volume.
Finally, although crypto trading volume was weak, Silvergett made significant gains in the first quarter, earning close to $ 25 million ($ 0.79) over the previous quarter and over a year. The main reason for the increase in profits is that SEN customers bring a lot of deposits to the bank. As the Federal Reserve begins to increase its loan rates overnight and long-term interest rates rise in the first quarter, Silvergate will be able to move those deposits to higher bonds, making a huge profit.
One reason to love this stock
One of the reasons I love this stock is that the crypto trading volume in the first quarter is low and Silvergate is still increasing SEN customers and reporting high profits. Yes, crypto trading volumes affect the banking business but not the only reason. Silvergate customers have been thinking about crypto for a long time and I expect the bank to have a strong year as high interest rates increase profitability.