Silvergate Capital’s Profit Grew 283%, Bitcoin to Hit All-Time Highs

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Silvergate Capital (NYSE:SI) reported Q2 earnings of $42.5 million, which accounts for a 283% growth from Q2 2020. Canaccord Genuity analyst Joseph Vafi asserts that the firm is becoming an essential banking partner for the cryptocurrency industry.

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Q2 2021 hedge fund letters, conferences and more

Stellar Earnings

According to the earnings report, Silvergate’s deposits from crypto customers swelled by $3.5 billion to $9.9 billion in the second quarter, driven by the strength of the Silvergate Exchange Network (SEN).

“The SEN handled around 138,000 transactions in Q2, down from 167,000 in Q1, while SEN volume increased 44% sequentially to $240 billion.” Also, the firm reached 1,224 customers in Q2, 120 of them new, while the pipeline looks vigorous with more than 200 prospects.

Silvergate is seen as an evolution that could yield FinTech versus a traditional bank model, as the company also increased its cryptocurrency fee income by $4 million, hitting more than a total record of $12 million.

“We believe the SI valuation discussion is now centered squarely on growth-centric valuation metrics, instead of traditional tangible book multiples,” said Vafi.

He added, “We believe that the franchise value Silvergate has created could indeed be greater than the earnings ramp conveys … This setup provides Silvergate much better than average strategic alternative options over time, in our view."

Alan Lane, president, and chief executive officer of Silvergate, stated: “It is an exciting time to be at Silvergate, and the second quarter was no exception. We nearly doubled pre-tax income compared to the prior quarter.”

Bitcoin to Hit All-Time Highs in 2021

Amid Silvergate’s Q2 success, Nigel Green, CEO of deVere boldly predicted that bitcoin would reach its previous all-time highs again by the end of 2021. He based himself on the “carefully considered arguments” and “new measured tone” by Tesla Inc (NASDAQ:TSLA)’s Elon Musk, Twitter Inc (NYSE:TWTR)’s Jack Dorsey and Ark Invest’s Cathie Wood.

During the B Word Conference on Wednesday, also attended by Green, the noted industrialists all endorsed the cryptocurrency and discussed its enormous potential.

Nigel Green said: “Musk, Dorsey, and Wood are three of the most important and forward-thinking business leaders of our time.  What they say matters.”

“Crucially, the tone was less sensationalist than it has been in past, with all the panelists putting across carefully considered, fact-based arguments about why they are all bullish on the future of bitcoin and crypto generally.”

Cathie Wood, founder of Ark Invest added that bitcoin had a lot to offer socially, “by providing financially underserved people with ‘access to payment technology’... everywhere around the world without friction.”