Shares of the crypto bank Silvergate Capital (SI 52.21%) are trading about 7% down as of 11 a.m. EST after receiving some negative sentiment from an analyst.
Wedbush analyst David Chaverini recently issued a research note that said he is taking Silvergate Capital off of Wedbush's best ideas list. Chaverini cited the fact that there is close to 100% probability that that U.S. will adopt a central bank digital currency, which could reduce the market for Meta Platforms' U.S. dollar-backed stablecoin Diem, of which Silvergate is the exclusive issuer.
Chaverini also expressed concerns about Diem because the President's Working Group on Financial Markets, in its recommendation about stablecoins, said issuers should minimize commercial association.
Still, Chaverini assigned Silvergate an outperform rating due to the bank's "leadership position in its high-growth core market of facilitating real-time USD transfers between crypto hedge funds and crypto exchanges."
The Diem partnership has certainly solicited a lot of excitement about the stock in recent months, but the future of the partnership is still uncertain. I expect management will make some commentary about the state of the partnership and whether it launched the pilot in its upcoming Q4 earnings report.
However, I still think this bank can perform well with its real-time payments platform that helps to better facilitate crypto trading.
The platform has generated billions of excess deposits that the bank can deploy into higher-yielding assets in a rising-rate environment. Unlike many tech and growth stocks, Silvergate's business model can perform very well as interest rates go up.