Silvergate Capital's demise gained steam last week
Subscribers to Chart of the Week received this commentary on Sunday, March 5.
The crypto world is never one to stay out of headlines, and this week is no different, with several news stories about crypto-friendly banking institutions such as Silvergate Capital (SI) and Bitcoin (BTC). Echoing this fixation for options trader has been CoinDesk Market Index (CMI) and below, we will take a closer look at what type of response this week’s news has brought to the performance on the charts for the securities.
BTC and CMI, which as you can see in the table below (pulled before the opening bell Friday), have suffered a significant drop comparatively to futures on the broader S&P 500 Index (SPX). These losses steepened as of this writing at midday as investors unpack Silvergate’s swift exit from Coinbase Global (COIN) (discussed more below) and the liquidation of $62 million worth bullish bitcoin futures during Asian market trading hours last night. The surplus in liquidation came following insufficient funds for options traders after the market moved in a direction that was unsupportive of their bets.
Bitcoin hit a two-week low on the heels of this week’s crypto tensions, but losses seem to have been captured by several modes of support. The 60-day moving average moved in quickly this afternoon, which also happens to be the site of the formerly resistant, round $22,000 level. Despite this week’s volatile price action, BTC maintains an impressive 34% year-to-date lead.
It was a bloodbath for Silvergate Capital on Thursday, one that brought multiple crypto partnership severances, specifically from aforementioned Coinbase Global and Galaxy Digital. A day prior, the company had expressed concern over the probability of continuing its business long term, sending customer confidence plunging-- aided and abetted by a slew of bear notes. Now, SI is trading at a record low of $4.85 -- and is fresh off its worst daily percentage drop ever -- all while (unsurprisingly) nursing a more than 65% year-to-date deficit. Contrary to BTC, SI’s own 60-day moving average has served as overhead pressure on the charts.
Not only has SI been added the Short Sale Restricted (SSR) list today, but options are running red-hot. Nearly 200,000 puts have crossed the tape in Friday afternoon’s trading so far, volume that’s five times the intraday average. Most popular looks to be the weekly 3/10 1.0- and 2.50-strike puts, which implies options bears are betting on SI shares to trade at or below $1.00 by next Friday’s expiration.
The crypto verse always finds a way to make noise on Wall Street in the coming weeks, as Silvergate Capital is expected to reschedule its delayed earnings. Keep an eye out for developments with Apple’s (APPL) crypto wallet app as well, while Binance takes a hit regarding a suspected missing $1.8 billion USDC. All-in-all, if you enjoying the brief crypto climb to start 2023, this week should serve as a reminder that the enigmatic sector is still a volatile roller coaster.