This is why Silvergate stock crashed

The crypto-friendly Silvergate Bank stock has fallen hard.

The shares of the crypto-friendly Silvergate Bank have fallen hard. Let's take a closer look at the reasons and the risks for the crypto sector.

Only a handful of banks are willing to do business with the crypto sector. In the U.S., it's mainly Silvergate and Signature that handle a large portion of fiat transactions going to Web3 outfits. One of these banks, Silvergate, is now facing mounting trouble. The bank failed to publish its annual report on time, per a so-called 10K filing with the SEC and people are questioning the company's financial health.

This has led many shareholders to sell. The stock is currently down about 31%. In the filing to the U.S. Financial Industry Regulatory Authority, Silvergate justifies the delay with debt instruments (a range of instruments a company, organization, or institution can issue to raise financing) that the bank sold in January and February. Silvergate Bank also expects losses in the coming months.

Silvergate’s statement

"These additional losses will negatively affect the company's regulatory capital ratios ... and could leave the company and the bank undercapitalized," according to Silvergate.

The company is currently reevaluating its activities and strategies in light of the business and regulatory challenges it's facing. In the wake of the crypto winter and the FTX scandal, Silvergate Bank faced a bank run. In the fourth quarter customers withdrew about $8.1 billion of the $14.3 billion in available customer funds.

If Silvergate doesn’t recover from the current events, it could spell big trouble for the U.S. crypto space.