Silvergate was down - blame it on Coinbase

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Over the past week, Silvergate Capital (SI) has lost more than 25% of its value. Is this a reason for its investors to be alarmed? I don't think so.

The stock was down because investors rushed to buy Coinbase when it began trading publicly. They realized profits from SI's stock sale to diversify their exposure to crypto in the public markets.

Yesterday, SI reported record earnings. SI, which serves major crypto firms such as Coinbase, Gemini and Kraken, added a record 135 digital currency customers in Q1–more than it added in all of 2020. It also reported sensational growth for SEN Leverage - it's latest product offering. SEN Leverage was the fastest growing product, with $196.5M in outstanding balance. SEN Leverage is expected to be a massive contributor in growing SI's revenues and profits. It's critical to serving clients who are looking to make leveraged bets in this current market under one roof.

Bottom line: I remain bullish on SI despite the recent slump, and as mentioned in a previous article believe it will continue to benefit from increased crypto adoption. I expect SI to have a great 2021 since it already has the major crypto exchanges and institutions as its clients. As more join its network, it becomes more and more valuable, which causes more clients and institutions to want to join the network. So don't panic and buy the dip, investors likely sold the stock last week to raise funds and buy Coinbase.

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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