Why Silvergate Capital Stock fell today

What happened

Silvergate Capital (NYSE:IF) the stock suffered significant selling in Friday’s session. It closed the day down around 15.4%.

Silvergate provides banking services to major cryptocurrency exchanges, and its stock price often trades in line with movements in the broader cryptocurrency market. With Bitcoin (CRYPTO: BTC) and other leading digital tokens experiencing heavy selling today, the fintech company’s share price was dragged lower by the trend.

Image source: Getty Images.

So what

The cryptocurrency market was awash in a sea of ​​red on Friday as investors retreated from high-risk investments. Bitcoin was down 9.4% during the daily session. During this time, Ethereumit is (CRYPTO:ETH) and Solanait is (CRYPTO:SOL) the tokens were down 11.1% and 15.5%, respectively, at their lows for the day.

While there hasn’t been any company-specific news dragging down Silvergate Capital‘s share price, it’s no surprise its stock has been hit hard amid the selloffs that have dragged down valuations of stocks and cryptocurrencies. Not only is the company’s business highly dependent on the crypto market, but its stock is also high-risk and has a growth-dependent valuation. Amid bearish pressures hitting the equity and cryptocurrency markets, the company’s stock price closed double-digit lower on Friday.

Now what

In the stock and cryptocurrency markets, investors’ appetite for risk appears to be waning. Factors such as the omicron variant of the coronavirus, rising Treasury bond yields and new regulatory developments are prompting investors to take money off the table and shift to safer investments. How long this trend will persist remains to be seen, but it is likely that Silvergate’s valuation will continue to move in tandem with the momentum of the broader crypto space.

Silvergate Capital now has a market cap of around $5.2 billion and is valued at around 29 times this year’s expected sales and 68 times expected earnings.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

Sallie R. Loera