While Silvergate Stock Crashed in Q2, Its Earnings Crushed: Here’s Why

The stock is down around 1.15% at the 5-day view. But for the 30-day period ending Friday, SI has rallied some 74% to a 6-month capitulation of 13%. Silvergate shares were trading for $93.29.

Why One Crypto Stock Crashed While Its Earnings Blew Up

Silvergate stock took a dive with the rest of crypto stocks as its revenues surged last quarter. Investors dropped shares and took their money somewhere else with rising inflation, recession woes, and crypto winter setting in.

But the La Jolla, California bank, with a special place for crypto companies that struggle to find banking services, filled its coffers like crazy last quarter.

The company raked in $16 million more in cash than analysts projected. The current monthlong rally might be an indicator that markets are getting around to pricing in the U.S. crypto bank’s quarter two earnings beat.

Last week, Silvergate’s Q2 earnings report published $79.8 million in revenue with $1.13 earnings per share. In quarter two of 2021, that figure was a comparatively paltry $0.8 per share on a $42.5 million take. That’s massive year-over-year quarterly earnings per share increase.

The latest Wall Street analyst recommendation on Silvergate Capital stock is a Strong Buy, with nine analysts giving SI a Buy rating and 1 analyst rating the crypto stock a “Hodl.” Meanwhile, short interest in the crypto stock reached a record high a week ago.

How did the company make so much money while cryptocurrency prices crashed precipitously from last November’s high?

What makes the difference between Three Arrows Capital, Celsius Network, Voyager Digital, and Silvergate Capital in the crypto industry?

How Silvergate Grew Earnings As Another Crypto Winter Started

The three former firms mentioned are now in bankruptcy. Silvergate CEO Alan Lane said his company pulled off the hat trick by focusing on what it knows. Instead of giving in to “Fear of Missing Out,” he said:

“We really try to stay in our lane and not chase the latest fad, but really just focus on what we do well, and essentially just solving problems for our customers.”

The La Jolla bank was once a traditional finance company, and Lane was a “TradFi” banker. But after making the pivot to do business carefully with underserved crypto companies, the bank’s fortunes have swelled. Lane said:

“We’re absolutely still interested in lending against bitcoin. We believe that is some of the best lending we’ve ever done, and we want to continue to grow that.”

Silvergate’s record of successful risk management will likely prove a useful case study for other crypto ventures and traditional financial services companies ready to dip a toe in cryptocurrency.

The crypto bank isn’t slowing down at combining the old with the new in finance. It announced the addition, Tuesday morning, of a new product development chief. Alaric Eby has joined the Silvergate team after a stint as Vice President of New Product Development for American Express. Heading Amex Digital Labs, Eby oversaw the launch of Amex Express Checkout.