How Silvergate Capital Stock rose 18.9% last month

What happened

Shares of Silvergate Capital ( IF 7.92% ) gained 18.9% in February, according to data from S&P Global Market Intelligence. The company’s focus on the cryptocurrency market typically moves stocks in tandem with Bitcoin ( BTC 2.10% ) and Ethereum (ETH 3.73% )but this particular period had a different ending.

SI data by YCharts.

So what

Silvergate shares followed Ethereum and Bitcoin in the first three weeks of February. All three posted returns of over 15% in the first week as the cryptocurrencies gained support from traditional banks and next-gen financial app developers. Then they all retreated to a roughly balanced level for the month as crypto investors refocused on inflation worries and geopolitical risks.

But Silvergate broke away from the major cryptocurrency names at the end of the month, posting massive trading volumes during this period. The company did not have any specific news during the last week of February, but it appears that institutional investors started or increased their positions in this stock as a late reaction to the good news earlier in the month.

Now what

Silvergate actually received two big news items last month, which the market ignored at the time but might have revisited later.

First, the company took over the Diem stablecoin from the former partner Metaplatforms, ending a partnership that began when Meta was known as Facebook. Having full control over a suitable stablecoin could come in handy in Silvergate’s capitalization services for major cryptocurrency exchanges, though Diem isn’t much more than a name right now.

A pile of gold and silver coins stamped with various cryptocurrency logos.

Image source: Getty Images.

Next, Silvergate expanded its digital exchange network to include euro-based transactions. The new network uses the same underlying platform as Silvergate’s dollar services and is interconnected with its older sibling. This launch both improves the stability of the exchange network in a changing exchange rate environment and underlines Silvergate’s global ambitions. The Euro Network is expected to provide a material boost to the company’s revenue streams over the coming quarters.

That being said, the gains didn’t have much resistance. Silvergate shares fell more than 19% in the first week of March with no company-specific news. Once again, stocks have been trading between Ethereum and Bitcoin since the start of the year.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Sallie R. Loera