After FTX’s collapse in November, experts warned of contagion, or the systemic damage that the crypto exchange’s failure could have on the broader sector. The biggest loser after FTX itself may be Silvergate, the California-based bank that established itself as the crypto industry's financial backbone.
Banks rely on customer deposits, which plummeted as Silvergate’s central client, FTX, went bankrupt and crypto companies reckoned with the exacerbated bear market. At the time of FTX's collapse, about 90% of the bank’s deposit base came from crypto companies. It immediately felt the effect, with the bank suffering from outflows of $8.1 billion in digital asset deposits in the fourth quarter of 2022 alone. By the end of December, its total deposits sat around $6 billion.
