What happened

Shares of the crypto bank Silvergate Capital (SI -2.44%) traded more than 6.6% lower as of 12:40 p.m. ET today after a Wall Street analyst lowered his rating on the bank and also cut his price target.

So what

Wells Fargo analyst Jared Shaw double-downgraded Silvergate Capital from an "overweight" rating to "underweight" and also lowered his price target from $115 to $70. Shaw believes growth at Silvergate is going to be "significantly limited in the current environment," according to a research note recently put out by the analyst.

Silvergate Capital has developed a real-time payments system called the Silvergate Exchange Network (SEN) that better facilitates crypto trading between institutional investors and crypto exchanges. Clients that join SEN bring large sums of cheap deposits that Silvergate can invest into higher-yielding assets.

Shaw also said Silvergate is experiencing less volume on SEN, which is a key source of profitability for the bank. He's also worried about deposit outflows as investors lose interest during the crypto winter.

Now what

I'm a little confused about why Shaw is so concerned now about lower SEN volume and deposit outflows.

During the second quarter of the year, the price of Bitcoin dropped from above $45,000 to less than $20,000, and SEN transfer volume came in at $191 billion, which was nearly $50 billion higher than the volume in the first quarter. SEN also added more than 80 customers in the second quarter. Digital currency deposits in Q2 did decline by about $900 million, but I think many considered this reasonable, given the drop in the price of Bitcoin.

During the third quarter, the price of Bitcoin has held fairly steady at about $20,000. Crypto exchange trading volume may have been down a bit from Q2 but did spike in September.

With Silvergate trading at about $74, Shaw's price target doesn't imply a lot of downsides from here anyway. I continue to believe Silvergate will play a critical role in providing infrastructure that will help exchanges and institutional investors trade crypto more efficiently, and therefore I believe the stock is a buy.