Silvergate Capital (SI): All the exposure without the risk

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So far Bitcoin is having a decent 2021. It hit a record high of more than $52K last week, continuing the upward trajectory it has been on since April of last year, when a single Bitcoin cost less than $5K. That rise now means that the sum of all Bitcoins in existence is worth almost $1T and Bitcoin is now the 8th most valuable asset by market cap. 

This time it's... different? These are some of the most dangerous words for any investor to believe wholeheartedly. Whether this latest Bitcoin rally proves more resilient than the previous highs is yet to be seen. In a previous article, I mentioned that the long-term upside case for Bitcoin remains, at the very least, somewhat anarchic. While proponents of Bitcoin see limitless potential and critics see nothing but risk, I'm still on the fence. I haven't bought any Bitcoins yet but I did get indirect exposure to Bitcoin through Silvergate Capital Group (SI)- a bank in California. SI provides a lot of exposure because many of the crypto-trading platforms and institutional investors are its clients. SI does not trade cryptocurrencies itself; it just facilitates the exchange of dollars among the companies and institutions that do. The dollars that sit in these trading accounts at the bank are non-interest-bearing accounts, which means it's effectively free money for SI.

SI's growth has been so spectacular in 2019 and 2020 that it has phased out all of the ordinary banking activities it used to do in order to focus completely on its digital currency exchanges. It's soaring in 2021 and will continue to grow because it already has the major crypto exchanges and institutions as its clients. As more join the network, it becomes more and more valuable, which causes more clients and institutions to want to join the network. 

Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.

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