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Why Shares of Silvergate Capital Jumped This Morning

By Bram Berkowitz - Updated Feb 8, 2021 at 10:03AM

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The bank is likely trading higher after Tesla announced it is buying $1.5 billion of bitcoin and as the 10-year treasury yield ticked higher.

What happened

Shares of Silvergate Capital (SI -1.83%) jumped as much as 21% out of the gate this morning. While shares have come down since then, the bank still traded much higher as of mid-morning.

So what

Silvergate Capital, which went public in 2019, is a roughly $5.6 billion asset bank based in La Jolla, California. The bank specializes in banking cryptocurrency clients such as institutional traders that trade various digital assets and crypto exchanges through its in-house payments system called the Silvergate Exchange Network (SEN).

SEN is a real-time payments network that can clear transactions in U.S. dollars instantly around the clock, 365 days a year, between two users in the network. This is ideal for institutional crypto traders and crypto exchanges because cryptocurrencies trade around the clock.

Picture of a bitcoin symbol.

Image source: Getty Images.

Shares of Silvergate have always appeared somewhat tied to the prices of crypto assets such as bitcoin (BTC -3.33%), which rocketed this morning after Tesla announced it had purchased $1.5 billion in bitcoin. Tesla also said it would start accepting bitcoin for payment of products.

Additionally, bank stocks got off to a good start this morning as the yield on the 10-year treasury note ticked higher, which is good for banks because it increases interest payments on long-term debt they loan out. 

Treasury Secretary Janet Yellen recently said President Joe Biden's proposed $1.9 trillion stimulus bill could return the U.S. to full employment by 2022. The yield on long-term treasury notes tends to move higher as the prospect of inflation and future interest rate hikes comes into play.

Now what

Silvergate was the top-performing bank stock in 2020. As conditions improve for the banking sector and digital assets like bitcoin become more mainstream and surge higher, this stock should follow suit.

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Stocks Mentioned

Silvergate Capital Corporation Stock Quote
Silvergate Capital Corporation
$57.50 (-1.83%) $-1.07
Tesla, Inc. Stock Quote
Tesla, Inc.
$685.47 (-1.79%) $-12.52
Bitcoin Stock Quote
$19,374.53 (-3.33%) $-667.30

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