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According to the bank, the over-leverage in the industry which led to several high-profile bankruptcies “created a crisis of confidence across the ecosystem and led many industry participants to shift to a “risk off” position across digital asset trading platforms.” The crypto-focused bank experienced a significant outflow of deposits in Q4 which forced it to take several actions “to maintain cash liquidity,” including the utilization of wholesale funding and the sale of debt securities “to accommodate sustained lower deposit levels and maintain its highly liquid balance sheet.”
In an effort to survive an extended period of lower deposits, Silvergate is taking several actions to help ensure the business remains resilient, including “managing its expense base and evaluating its product portfolio and customer relationships going forward.” The bank was also forced to lay off 40% of its staff in the first week of January as part of its efforts to reduce costs.