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Silvergate Restates Faith In Crypto Despite Q4 Withdrawal Drop – Report

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Silvergate Restates Faith In Crypto Despite Q4 Withdrawal Drop - Report

As withdrawals spiked following the demise of industry titan FTX, top asset management firm Silvergate Capital Corp reported a steep decline in fourth-quarter crypto-related deposits on Thursday and announced it would lay off 40% of its personnel (around 200 staff members).

In the premarket trade, the company’s shares, which lost around 88% of their value in 2022, were down 40%. According to the last financial report from the crypto-focused bank, total deposits from consumers of digital assets decreased from $11.9 billion at the end of September 2022 to $3.8 billion at the end of December 2022.

The bank sold $5.2 billion in debt instruments in the fourth quarter at a loss of $718 million to retain liquidity. Last year, the crypto market lost more than a trillion dollars in value as increasing interest rates fueled concerns about an economic slump. 

The downturn, including the collapse of cryptocurrency lender Celsius and the hedge firm Three Arrows Capital, contributed to the downturn in the industry. Also, the world’s leading digital currency, BTC, witnessed significant falls in 2022 after spectacular rises in 2020 and 2021. 

The poor performance of BTC often hurts the performance of other cryptocurrencies and the broader crypto industry. The leading crypto exchange FTX filed for bankruptcy protection in November, dealing the industry its worst blow. 

Consequently, cryptocurrency businesses are under intense regulatory scrutiny over how they manage their funds and run their operations. Since the FTX meltdown, Silvergate has also come under regulatory scrutiny as politicians hurry to enact new regulations for the unregulated cryptocurrency sector.

The asset management firm had previously said that FTX was not a custodian for any leverage loans it had made to the Silvergate Exchange Network and had no outstanding loans or investments in FTX.

Cryptocurrency Deposits Drop

The bank said that deposits related to cryptocurrency fell by a startling 68% in the most recent quarter. Per a WSJ report, Silvergate has more cash deposits than virtual asset deposits, according to a Wall Street Journal.

In contrast to its $3.80 billion deposits during the quarter, the bank had $4.60 billion in cash. While Silvergate is taking concrete steps to manage the present climate, its objective has remained the same, unwavering support for digital asset management.

Following the FTX crash, cryptocurrency lender BlockFi filed for bankruptcy, raising concerns about Silvergate’s liquidity. After BlockFi’s bankruptcy filing, the price of Silvergate stock decreased due to the news of exposure to the lending firm.

The bank claimed to have little exposure to BlockFi at the time. Nevertheless, the premarket hours saw a significant decline in the stock price of Silvergate Capital. The value of the Silvergate shares has decreased by around $6 as of this writing, or about 29%.


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Why Real Regulatory Change In Crypto Has Not Happened

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Why Real Regulatory Change In Crypto Has Not Happened



Legislators need to educate themselves on Web3 if they care about protecting consumers, Steven Eisenhauer, chief risk and compliance officer at Ramp, writes.


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South Korea to deploy cryptocurrency tracking system in 2023

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South Korea to deploy cryptocurrency tracking system in 2023


The Ministry of Justice in South Korea announced plans to introduce a crypto-tracking system to counter money laundering initiatives and recover funds linked to criminal activities.

The “Virtual Currency Tracking System” will be used to monitor transaction history, extract information related to transactions and check the source of funds before and after remittance, according to local media outlet khgames.

While the system is slated to be deployed in the first half of 2023, the South Korean ministry shared plans to develop an independent tracking and analysis system in the second half of the year. A rough translation of the ministry’s statement reads:

“In response to the sophistication of crime, we will improve the forensic infrastructure (infrastructure). We will build a criminal justice system that meets international standards (global standards).”

The South Korean police previously established an agreement with five local crypto exchanges to cooperate in criminal investigations and ultimately create a safe trading environment for crypto investors.

Related: South Korean prosecutors request arrest warrant for Bithumb owner: Report

The South Korean Supreme Court ruled that crypto exchange Bithumb must pay damages to investors over a 1.5-hour service outage on Nov. 12, 2017.

The finalized ruling from the supreme court ordered damages ranging from as little as $6 to around $6,400 be paid to the 132 investors involved.

“The burden or the cost of technological failures should be shouldered by the service operator, not [the] service users who pay commission for the service,” the court stated.


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Data Shows 50% Of Bitcoin Hashrate Controlled By Two Mining Pools

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50% of Bitcoin hashrate Controlled by Two Mining Pools

Bitcoin hashrate is becoming highly centralized, with a few mining pools controlling most of the blockchain mining power. The latest data from Mempool indicates that 50% of the total hashrate is held by Foundry USA and Antpool. 

A Highly Centralized Mining Network

Foundry USA has maintained a hashrate of over 30% of the total Bitcoin network for several weeks. It became the first mining pool of non-Chinese origin to lead the list in November 2021, following the ban on Bitcoin mining in China in the middle of the same year. 

Back then, Foundry USA contributed 17% of the total Bitcoin hashrate. Today, the US-based pool averages 34.1% of the mining power, equivalent to about 104 EH/s, considering that the Bitcoin hashrate is around 300 EH/S. 

Related Reading: First Bitcoin Mining Powered By Nuclear Energy To Open In The U.S. In Q1 This Year 

Antpool comes in second with about 18.0% of the total hashrate equivalent to about 58 EH/s. The Chinese-based pool used to be the largest Bitcoin pool but was affected by the ban on crypto mining which caused several miners in the region to migrate. 

Bitcoin Pool distribution records on Dec. 29, 2022 (3-day stats)/Mempool.com

What Is Behind This Trend?

The graph shows that over 80% of Bitcoin’s mining power is concentrated among just 5 pools. This contrasts with the beginning of 2022, when these five mining pools barely exceeded 60% of the hashrate. 

Some factors could have contributed to this rise. One of which is the location of the servers of the said pools. The closer the servers are to the pools and mining facilities, the lower the information transfer latency. This means that a miner will likely get more shares in the mining process and earn more Bitcoin (BTC) by connecting to a closer server. 

Bitcoin hashrate difficulty
Bitcoin hashrate difficulty for January/CoinWarz.com

Another factor is the financial incentives offered by these major mining pools. Bigger mining pools can consistently distribute profits to their members, who pay a commission for mining with their resources, driving more miners to their ecosystem. This is evident with the high mining difficulty in recent weeks due to the bullish movement of Bitcoin, making it difficult for smaller mining pools to be profitable. 

Related Reading: Why The S&P 500 Could Help Send Bitcoin Soaring Higher

However, Bitcoin’s highly centralized mining system poses significant dangers to the cryptocurrency. The miners could agree to reject transactions that do not meet a specific parameter leading to a 51% attack. 

We’ve seen such attacks occur on other Proof-of-Work blockchains like Ethereum Classic, which could be a problem for Bitcoin. In addition, these pools are recognized companies and could face pressures from regulatory agencies trying to control activities on the Bitcoin network. 

Bitcoin Price

So far, Bitcoin is still maintaining its bullish trend, with the leading cryptocurrency up by 40% since the start of the year. As of the time of writing, Bitcoin is trading at $23,400, according to data from Tradingview.com. 

Bitcoin Price on January 28| Source: BTCUSDT on Binance, TradingView
Bitcoin Price on January 28| Source: BTCUSDT TradingView

Featured image from Pixabay, charts from Trading View, Coinwarz, and Mempool


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