Crypto

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

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According to crypto-specialist bank Silvergate Capital (SI), the bear market that has hit all corners of the digital asset industry is not over yet and could get even more painful in the coming quarters.

The crypto sector may still face some pain for some cryptocurrency exchanges and funds over the next few quarters, “but at some point it will all get done and then we’ll just wait to see what the next catalyst is.” he said, TradFi CEO and former banker Alan Lane said in an interview with CoinDesk.

However, investors should not compare the current cryptocurrency price drop to previous ones given the broader global economic reset as digital assets fell along with macro trends including rising rates and inflationary pressures, Lane said.

Silvergate shares are down 42% this year, although they have jumped 33% in the last week. The VanEck Digital Transformation (DAPP) ETF, which contains a basket of various crypto stocks including the Coinbase (COIN) exchange and the Marathon Digital (MARA) miner, has fallen 67% this year but is up 15% last year. . Rising rates and fears of a recession have hurt global stock markets, especially stocks that are considered riskier. The Nasdaq Composite Technology Index has fallen about 25% since the start of the year.

Given the slowdown in cryptocurrency growth, analysts are predicting a weak quarter for a variety of crypto companies, from exchanges to miners, but Silvergate’s Q2 results have reversed the trend.

The Silvergate Exchange Network (SEN), a fiat marketplace for the bitcoin markets, saw a 34% year-over-year increase in USD transfers in the second quarter, with net income up 85% year-over-year.

Silvergate avoided bear market traps by sticking to what the bank does best and not chasing FOMO, Lane said. “We’re really trying to stay in our lane and not chase the latest fads, but focus on what we do well and basically solve our customer’s problems,” Lane said.

Investment bank Canaccord Genuity believes risk management has been a key driver of Silvergate’s positive results. “Perhaps the biggest long-term bright spot in history has been a risk management program that has resulted in loans not being written off despite significant volatility in spot prices for cryptocurrencies and some spillover of default into the wider ecosystem,” Joe, Equity Market Analyst at Canaccord, said. Wafi said in a note to clients.

Wafi also expects Silvergate to double its earnings over the next few years given the various growth engines the company is using. He values ​​the stock with a buy and a target price of $200; shares closed at $86.50 a share on Friday.

Amid the recent collapse of several over-indebted cryptocurrency-related financial institutions, Lane remains supportive of using bitcoin for his lending program.

“We remain interested in lending against bitcoin,” Lane said. “We think this is one of the best loans we’ve ever made and we want to keep developing it. »

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

Lane said the lending platform was created knowing it would come with volatility, and says the recent cryptocurrency debacle was a good stress test for Silvergate to show it can withstand volatility in its lending business model.

Among the lenders that are having trouble, Lane said, are those that offered unsecured or undersecured loans to customers, while Silvergate requires over-collateralization. If market hurdles persist, the borrower may repay their loan, pledge more bitcoins as collateral, or Silvergate may decide to liquidate the bitcoins on their behalf, if necessary.

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

“While details remain scarce, the assets acquired from Diem do provide a solid stablecoin platform for e-commerce, and we can only believe that demand from both payment platforms and merchants could be high over time,” Vafi added. from Canaccord. her note to clients.

Silvergate said on an earnings call that the stablecoin launch will continue this year.

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Passionate about cryptocurrencies and DeFI, Thomas brings international news on the subject!

Thomas E.
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