Nicknamed the “BTC King” by some, Michael Saylor has established himself as a true icon in the crypto space. The 57-year-old was one of the biggest critics of BTC for a long time. Last year, however, the tech entrepreneur decided to convert his company’s cash reserves into BTC. The price increase in the last year catapulted the market capitalization of his company to unimagined heights. However, the subsequent turbulence in the crypto market does not seem to have spoiled Saylor’s optimism. On the contrary: the American continues to buy BTC as if there were no tomorrow. His company now obtains the necessary small change from a bank in California that is still relatively unknown outside of the crypto space: Silvergate.
Who is Silvergate?
The bank from La Jolla in San Diego (California) was founded in 1988 as a classic bank. In 2013, however, the signs of the times were recognized and a crypto initiative was launched. Within just a few years, they have managed to establish themselves as the leading capital contact point for crypto companies. Loud own information they now have a customer base of over 1,300 companies from the fintech and crypto industry (as of Q3 2021).
Anyone who has been following the history of Silvergate for some time will associate the bank primarily with Meta’s (formerly Facebook) stablecoin project Diem (then Libra). End of January 2022 had that Wall Street Journal citing inside sources reports that Silvergate Capital owns the stablecoin project Diem from Meta would buy. The ambitious Facebook project wanted to come along diem originally revolutionized the global payment system. Since then, however, the consortium has been at odds with global regulators and successively restricted the functions of the stablecoin – BTC-ECHO reported.
The heart of the company, however, is the real-time payment platform Silvergate Exchange Network, through which the company serves an increasing class of companies and investors in the digital currency space around the world. What is special about the platform is that it aims to act as an intermediary for institutions to convert cash into cryptocurrencies in real time and vice versa. Since 2018, the platform has more than doubled its customer base. Almost 1,400 customers, including exchanges, family offices and crypto companies, are represented on the network.
New deal with MicroStrategy
The software manufacturer MicroStrategy is now one of the customers. The most recent loan, which BTC-ECHO reported on March 29, was made through the Silvergate Exchange Network leverage program to MacroStrategy, a subsidiary of MicroStrategy, which makes US dollar loans with BTC as collateral . The loan was secured with approximately $820 million worth of BTC.
The software house is now the company with the most bitcoins on its own balance sheet – currently there are 125,051 bitcoins worth almost six billion US dollars. On average, you paid around 30,200 US dollars per BTC. Saylor, who converted to pro-BTC in 2021, is optimistic his strategy will work. An official statement from the company states:
The SEN loan offers us an opportunity to expand our position as a leading publicly traded BTC investor.
Saylor is a BTC maximalist and more bullish in the long run than almost anyone. But he is also a realist and knows that an upcoming regulation is imminent that will affect the entire crypto sector. The BTC purist has often pointed out that he hopes the Biden administration will introduce regulations that clearly separate digital property from digital securities and digital currencies.
Stock with strong performance
Silvergate now has a proud market capitalization of around five billion US dollars. In 2021, the bank generated sales of around $176 million. The bottom line was a profit of 79 million US dollars.
The Silvergate Capital share was also able to make up some ground as the crypto currency recovered (see chart below). Since the lows at the end of January, the price has increased by more than 80 percent. The paper was able to clearly outperform the BTC price in the past few weeks. The share is also clearly up around 25 percent for the year as a whole. For comparison: Despite the rally of the last few days, BTC is still around 19 percent in the red on a yearly basis.
The relatively strong performance of the last few weeks can certainly also be explained by the fact that Silvergate is a bank. The banking sector is one of the beneficiaries of rising interest rates because it significantly improves the earning potential of banks.