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Why Silvergate Capital Stock Plummeted Today

By Keith Noonan – Dec 3, 2021 at 5:31PM

Key Points

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Even with the stock's big sell-off, shares are still up roughly 121% this year.

What happened

Silvergate Capital (SI 0.31%) stock suffered significant sell-offs in Friday's trading. It closed out the day down roughly 15.4%.

Silvergate provides banking services to leading cryptocurrency exchanges, and its stock price often trades in line with moves for the broader cryptocurrency market. With Bitcoin (BTC 2.44%) and other leading digital tokens undergoing steep sell-offs today, the fintech company's share price was dragged lower by the trend. 

A red Bitcoin logo.

Image source: Getty Images.

So what

The cryptocurrency market was awash in a sea of red on Friday as investors moved out of high-risk investments. Bitcoin was down as much as 9.4% in the daily session. Meanwhile, Ethereum's (ETH 3.03%) and Solana's (SOL 2.27%) tokens were down 11.1% and 15.5%, respectively, at their low points on the day.

While there wasn't any business-specific news driving Silvergate Capital's share price down, it's not surprising that its stock got hit hard amid sell-offs pushing equity and cryptocurrency valuations lower. Not only is the company's business heavily dependent on the crypto market, its stock is also high risk and has a growth-dependent valuation. Between bearish pressures hitting equity and cryptocurrency markets, the company's share price closed out Friday down double digits. 

Now what

Across both stock and cryptocurrency markets, investor appetite for risk appears to be wavering. Factors including the coronavirus omicron variant, rising Treasury bond yields, and new regulatory developments are prompting investors to take money off the table and move into safer investments. How long this trend will persist remains to be seen, but it's likely that Silvergate's valuation will continue to move in tandem with momentum for the broader crypto space. 

Silvergate Capital now has a market capitalization of roughly $5.2 billion and is valued at approximately 29 times this year's expected sales and 68 times expected earnings. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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