Why Silvergate Capital Stock Soared 35% in October

What happened

Silvergate Capital (NYSE:IF), the holding company of Silvergate Bank, saw its stock price climb 35.6% in October, according to S&P Global Market Intelligence.

This fintech, bank and exchange for institutional investors in digital currency, has greatly exceeded the Nasdaq Compound, which rose 7% during the month. Silvergate is up around 188% year-to-date to Nov. 8, trading at around $214 per share.

Image source: Getty Images.

So what

Silvergate rallied after reporting strong third-quarter results on Oct. 19, with net profit up 231% year-over-year to $23.5 million, or $0.88 per share , and 12.4% during the second quarter.

The company’s digital currency customers grew 40.6% year-over-year to 1,305, while its average digital currency customer deposits reached $11.2 billion, the highest amount in the company’s history.

In addition, the company made transfers of US$162 billion on its Silvergate Exchange Network (SEN), a platform that allows institutional investors to transfer money to digital currency exchanges and trading partners in real-time, 24 hours a day. That’s up 342% year-over-year, but down from $240 billion in the second quarter. The sequential decline in the use of the SEN was correlated with the decline in spot trading volumes of Bitcoin and Ethereum, but they did not fall as much – 32% compared to 43% for spot cryptocurrency trading.

The stock really jumped at the end of the month after Morgan Stanley Analyst Sheena Shah released a research note stating that Silvergate stock prices track the stock price of Bitcoin, the largest cryptocurrency, which itself has had quite a run. This essentially confirmed what Silvergate executives pointed out during the third quarter earnings call. But CEO Alan Lane said that while there is a strong correlation, it’s not 100% and should be less correlated as Silvergate adds more products and services:

We are in a growing industry with a growing customer base and an expanding product line. And so, while we certainly have a strong correlation with spot trading volumes…we think that’s all going to generally rise and recover in the months, quarters, years ahead. And as we continue to add additional products and services, we will continue to generate more and more revenue.

Now what

Silvergate has positive developments that should drive continued growth. Earlier this year, Metaplatforms, the company formerly known as Facebook, has chosen Silvergate as the exclusive issuer of its upcoming stablecoin Diem. The Diem pilot is expected to be released soon, as the company has been waiting for the President’s Financial Markets Task Force to release its stablecoin risks and opportunities report for guidance. This report came out last week, so look for the Diem pilot launch soon.

Additionally, in the third quarter earnings report, the company said its SEN leveraged loan commitments were $322 million, down from $258 million on June 30 and $35 million a year ago. a year – more positive news.

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