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Cryptocurrency has been in the news regularly over the past year, with a mix of positive and negative reports.
As crypto is expanding and becoming a greater part of the financial world, more people are taking an interest in the industry. One of the latest pieces of news to come out of the crypto world is the closure of Silvergate. This has made headlines around the world but what does the closure of Silvergate mean for crypto in the near future?
What was Silvergate?
Silvergate was a bank based in California that opened for business in 1988. It was one of the first banks to offer services for cryptocurrency users via the Silvergate Exchange Network. The network provided access to 24/7 instant transfers between crypto exchanges and investors, with the fact the transfers were immediate and could be made outside of regular banking times being the big draw for many users. It is believed, Silvergate was the first regulated bank to offer such a service and in the third quarter of 2022 it had $12 billion in deposits made via the exchange network.
Why did Silvergate Close?
Late 2022 was a difficult period for the crypto industry and prices for cryptocurrencies fell. This led to the collapse of some crypto exchanges, with the demise of FTX being one of the most widely reported in the mainstream news. This led to rumours of problems at Silvergate and share prices started to fall. As the number of deposits being made at Silvergate started to drop, the bank issued a warning that it was assessing whether it could continue operating. This saw many of the major players in the cryptocurrency industry, including Coinbase Global Inc and Galaxy Digital to drop Silvergate as their banking partner. As a result, on the 8th of March 2023, Silvergate announced it would be closing.
The Impact of the Closure on the Crypto Industry
Everyone in the crypto industry could see what was coming in terms of the Silvergate closure thanks to the warning issued by the bank itself and the fact the share price was falling sharply. This allowed all those who were using the bank to move away before the damage was done. The loss of Silvergate does leave a hole in terms of fiat and cryptocurrency exchange outside of regular banking hours but there are several solutions to have emerged, with the possibility of U.K.-based crypto firm BCB Group expanding their services to include the US dollar. The closure of such a major crypto banking company could present some issues for the major cryptocurrencies, such as Bitcoin. The liquidity of Bitcoin could suffer because of the Silvergate closure and the difficulties of Silicon Valley Bank. However, following the rescue of Silicon Valley Bank, the price of Bitcoin has rebounded. That is great news for anyone who uses the cryptocurrency, whether it be for video games, tech products, or bitcoin slot games.
There is no doubt the closure of Silvergate is disappointing for the crypto industry, especially in the United States. However, the fact the price of Bitcoin has rebounded in the days following the closure is a sign crypto will continue to enjoy a better year in 2023.
