The crypto industry woke up to seismic news on March 9, 2023, as Silvergate Capital — one of the most important banking partners for digital asset companies — confirmed it would wind down operations and voluntarily liquidate its bank. The announcement, made late on March 8, triggered an immediate sell-off across crypto markets, with Bitcoin plunging below $21,000 and Ethereum shedding over 6% within hours.
TL;DR
- Silvergate Capital announced voluntary liquidation after suffering $1 billion in Q4 2022 losses
- Bank run saw investors withdraw over $8 billion in deposits following FTX collapse
- Bitcoin fell below $21,000, hitting a 7-week low; Ethereum dropped more than 6%
- All customer deposits will be fully repaid under the liquidation plan
- DOJ, Federal Reserve, and California regulators had ongoing investigations into the bank
Silvergate’s Fall From Grace
Silvergate Bank had long served as one of the two primary banking partners for cryptocurrency companies in the United States, alongside New York-based Signature Bank. With just over $11 billion in assets — compared to Signature’s $114 billion — Silvergate was the smaller but arguably more crypto-native of the pair. Its Silvergate Exchange Network (SEN), a payments platform that enabled 24/7 fiat transfers between crypto exchanges and institutional investors, was considered one of the crown jewels of crypto infrastructure.
But the collapse of FTX in November 2022 proved catastrophic for Silvergate. The bankrupt exchange had been a major Silvergate customer, and the fallout triggered a devastating bank run. Investors raced to withdraw more than $8 billion in deposits, forcing Silvergate to sell assets at significant losses. The bank reported a staggering $1 billion loss for the fourth quarter of 2022 alone.
Less than a week before the liquidation announcement, Silvergate had already discontinued its SEN platform — a clear signal that the end was near. Major crypto companies including Coinbase and Galaxy Digital had preemptively cut ties with the bank in the days leading up to the announcement.
The Liquidation Plan
In a statement, Silvergate said the decision came “in light of recent industry and regulatory developments,” adding that “an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward.” The company confirmed that all deposits would be fully repaid, though it did not specify how it would resolve outstanding claims against the business.
Centerview Partners was appointed as financial advisor, with Cravath, Swaine & Moore providing legal counsel. All deposit-related services were said to remain operational during the wind-down period, with customers to be notified of any further changes.
Regulatory Pressure Mounts
The liquidation came amid mounting regulatory scrutiny. Silvergate had disclosed that it was delaying the filing of its annual 10-K report for 2022 while assessing the “viability” of its business. The delay was partly attributed to an ongoing Department of Justice investigation, as well as congressional inquiries and probes from the Federal Reserve and the California Department of Financial Protection and Innovation.
Market Carnage
The news hit crypto markets hard. Bitcoin dropped 4.2% to approximately $20,791, reaching its lowest level in seven weeks. Ethereum mirrored the decline, falling more than 6% to around $1,438. The broader market saw significant liquidations, with the S&P 500 itself declining 1.9% on the day. Bitcoin’s 7-day losses stretched to over 13%, reflecting the cumulative impact of the Silvergate saga.
DeFi and Institutional Implications
For the decentralized finance sector, Silvergate’s collapse represented a critical blow to the fiat on-ramp infrastructure that connected traditional finance with DeFi protocols. The loss of SEN meant that institutional players faced higher friction when moving funds between exchanges and DeFi platforms, potentially reducing liquidity across the ecosystem.
With Signature Bank remaining as the other major crypto-friendly bank, questions immediately surfaced about concentration risk. If crypto companies were now reliant on a single primary banking partner, the entire industry’s fiat infrastructure was arguably more fragile than ever. DeFi protocols that depended on seamless fiat-to-crypto bridges faced an uncertain road ahead.
Why This Matters
Silvergate’s downfall is not just a banking story — it is a structural risk event for the entire crypto and DeFi ecosystem. The bank’s SEN network was foundational infrastructure that enabled institutional capital to flow into digital assets. Its removal creates a bottleneck that could constrain liquidity, increase costs, and slow adoption precisely when the industry can least afford it. The regulatory investigations surrounding Silvergate also signal that authorities are scrutinizing the banking-crypto nexus with unprecedented intensity, which could have lasting implications for how DeFi protocols access traditional financial rails.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk. Always conduct your own research before making investment decisions.
8 billion in deposits withdrawn after ftx collapsed. silvergate was basically the banking backbone for the entire crypto industry and it got taken down by someone elses fraud
silvergate was collateral damage from FTX. they held SEN accounts for basically every crypto company in the US. when FTX imploded everyone pulled deposits in panic
svb_before_silver 8 billion withdrawn in days. crypto companies basically bank-ran their own bank trying to escape FTX contagion
silvergate had only 11 billion in assets compared to signatures 114 billion. they never had the buffer to survive a bank run of that magnitude
btc under 21k and eth down 6 percent in hours. the silvergate sen network being suspended was the real pain point, no fiat on ramps for dozens of exchanges
SEN going down was the real crisis. exchanges couldnt process fiat withdrawals for days. silvergate wasnt just a bank, it was the plumbing
fiat_plumbing SEN going dark was the actual crisis. exchanges couldnt process withdrawals for days and nobody talks about it
SEN network suspension was the real killer. fiat on-ramps went down for dozens of exchanges and the liquidation became inevitable. contagion took them out
contagion from FTX killed three banks. silvergate, signature, silicon valley. the cascade effect was brutal and nobody saw the second two coming