Bear Market for Digital Assets Not Impacting SEN Leverage’s Institutional Volume

Loans collateralized by bitcoin kept flowing through SEN’s virtual pipes despite a downturn in the market

article-image

share

key takeaways

  • Silvergate Capital reported earnings Tuesday, with a significant uptick in deposits and volume on its exchange network
  • Despite a chill through the digital assets market, volume on SEN Leverage increased by nearly 1,000% during the last quarter

This past quarter’s violent market gyrations, which led to the price of bitcoin falling by nearly 50%, didn’t have much of an impact on demand for Silvergate’s SEN Leverage service according to comments from executives on a recent analyst call. 

Silvergate operates the Silvergate Exchange Network (SEN) which allows for instant settlement of dollar-denominated transactions. As Silvergate is the only banking partner that will work with many exchanges, SEN allows traders to send capital between exchanges instantly without using SWIFT or FedWire which are both quite slow in comparison.

SEN’s counterpart, SEN Leverage, allows clients to collateralize their bitcoin holdings for dollars should they need to cross-leverage their digital assets into other asset classes.

During its earnings call, Silvergate said that SEN Leverage reported that approved lines of credit had jumped to $258.5 million, up $196.5 million quarter-over-quarter. This isn’t as dramatic an increase as some of Silvergate’s other business lines, but it does reflect continued growth in the vertical.

“We are not really seeing a fall off in demand as it relates to our institutional investor clients,” CEO of Silvergate, Alan Lane, said during an analyst call. 

Lane said that with “prices coming down, there just has not been as much recent demand for actual borrowing.”

Ben Reynolds, Silvergate’s Chief Strategy Officer, said during the call that the bank had seen customers keeping more liquidity at Silvergate in the form of deposits than they needed to execute their trading strategies, which led to larger dollar transfers per transaction, but a fewer number of overall transfers.

When asked by analysts if the bank is considering expanding the SEN Leverage product outside of institutional investors, Lane explained that the bank is looking to “leverage the network effects of SEN and continue to press our advantage with that network instead of doing a series of one off loans.”

“That might ultimately end up being somewhat commoditized and really kind of a race to the bottom in terms of someone coming in and saying, ‘well, if you are doing that loan at 7%, we will do it at 6%,’ and it’s the same as with any type of loan product,” Lane said.

Silvergate’s stock is currently trading at $105.32, up 13% on-week.

Tags

upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

Curve's Stablecoin and Lending Market

Research

AMMs are at the root of everything elegant and useful in DeFi.That's why Curve put LLAMMA at the center of its lending protocol.

/

article-image

Dogecoin is handling more transactions than both Ethereum and Bitcoin — with drastically lower fees

article-image

Some of the banks are getting to a point where “they may decide” for or against CBDC implementation

article-image

The Curve community is gauging whether or not solid price oracles should be implemented in select pools with deep liquidity

article-image

Despite MiCA’s passage, both ESMA and Europe’s Systemic Risk Board want to ensure crypto is regulated and investors are protected

article-image

Bloomberg found that nearly half of crypto companies recently surveyed receive audit services from Deloitte, EY, PwC or KPMG

article-image

Hong Kong is “rich in tycoons and well-capitalized family offices that could fund crypto firms moving into the city,” Matrixport’s head of research told Blockworks