Shares of the crypto bank Silvergate Capital (SI 52.21%) have dropped nearly 5% as of 11:51 a.m. EST amid a big drop in the market due to fears of omicron, but also along with positive sentiment from an analyst today.
The Dow Jones Industrial Average has dropped more than 618 points as of 11:51 a.m. ET, while the Nasdaq Composite is trading 1.7% down. Bitcoin (BTC 0.73%), the world's largest cryptocurrency, has fallen about 2.5% over the last 24 hours.
Silvergate has developed a real-time payments platform that helps better facilitate crypto trading among exchanges and institutional traders, so the stock price movement is somewhat correlated with the movement of Bitcoin and the broader crypto market.
Despite the market sell-off, in a somewhat positive development for Silvergate, Craig-Hallum analyst George Sutton issued a research note today, maintaining his buy rating on the stock and increasing his price target on Silvergate from $170 to $180. Silvergate stock has been volatile. At its current price level of around $134 per share, the stock is still up more than double year to date, but not too long ago it surpassed $220 per share. Still, Sutton's price target implies 34% upside.
The reason I like Silvergate more than most crypto investments is that it's also a bank, meaning it can hedge against inflation. While Bitcoin has been falling with growth stocks, Silvergate's SEN platform has brought in billions of deposits the bank doesn't pay any interest on.
The bank has been conservative, deploying most of these deposits in safe and liquid securities. When inflation sets in and the Federal Reserve eventually increases interest rates, Silvergate will invest and reinvest those deposits into securities with higher yields, bringing in higher profits. That's why, despite its ties to Bitcoin, I still think Silvergate can succeed in a lower crypto market.