Silvergate Sees Huge Q1 Earnings Despite Challenging Market Environment

Silvergate Capital (SI) stocks surged on Tuesday after the digital asset-focused bank reported first quarter earnings.

According to Barron’s, Silvergate saw its net income grow to $27.4 million during the first three months of 2022, which is more than twice the earnings from the same period last year and well above the previous quarter’s $21.4 million mark. Given general cryptocurrency volatility, many analysts were anticipating that SIlvergate would come in around $16.1 million.

“We started off 2022 on a strong note, driven by the power of our platform and continued progress on our strategic initiatives,” Alan Lane, the group’s CEO, said in a statement. “I’m particularly pleased with our first quarter results when you consider that this was one of the most challenging periods for the broader crypto ecosystem since the beginning of the pandemic.”

The growth in earnings comes despite the fact that fee income from digital currency customers fell to $8.9 million from $9.3 million last quarter, and the volume of transfers dipped 35%. The fact that earnings grew despite these hurdles shows continued interest in digital assets and a growing appeal of the space to both retail and institutional investors.

Silvergate is the third-largest holding in the VanEck Vectors Digital Transformation ETF (DAPP) at 7.16%. The bank saw an immediate 5% surge following the earnings announcement. DAPP’s other main holdings include Block (SQ) and Coinbase (COIN). Block is expected to report its earnings next month, and Coinbase is coming off of monster 2021 fourth quarter earnings — the company generated $2.5 billion, up from $585.1 million in the fourth quarter of 2020.

Regulatory issues remain the biggest unknown in the crypto space, but the presence of institutional money and the rapidly growing digital infrastructure make funds like DAPP particularly appealing. As the companies at the forefront of the digital revolution continue to rake in earnings, it becomes more likely that regulations will tilt towards being common sense and supportive of the space.

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