Dubbed the “King of Bitcoin” by some, Michael Saylor has established himself as a true icon in the crypto space. The 57-year-old was one of the biggest critics of Bitcoin for a long time. However, last year, the tech entrepreneur decided to convert his company’s cash reserves into Bitcoin. The price increase in the last year catapulted his company’s market capitalization to unimaginable heights. However, the subsequent turbulence in the cryptocurrency market does not appear to have dampened Saylor’s optimism. On the contrary: the American continues to buy Bitcoin as if there were no tomorrow. His company now gets the little change needed from a bank in California that is still relatively unknown outside of the crypto space: Silvergate.
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Who is Silvergate?
The La Jolla Bank in San Diego, California was founded in 1988 as a classic bank. In 2013, however, the signs of the times were recognized and a crypto initiative was launched. In just a few years, they have managed to establish themselves as the main point of contact for capital for cryptocurrency companies. According to their own statements, they now have a customer base of over 1,300 companies from the fintech and cryptocurrency industry (as of Q3 2021).
Anyone who has been following the Silvergate story for some time will associate the bank primarily with the Meta (formerly Facebook) Diem (then Libra) stablecoin project. End of January 2022 had to Wall Street Journal citing insider sources reports that Silvergate Capital owns the Diem stablecoin project of Goal would buy. The ambitious Facebook project wanted to accompany us diem originally revolutionized the global payment system. Since then, however, the consortium has been at loggerheads with global regulators and successively restricted the stablecoin’s functions, BTC-ECHO reported.
The heart of the company, however, is the real-time payment platform. Silvergate Exchange Network, through which the company serves a growing class of companies and investors in the digital currency space around the world. The special thing about the platform is that it aims to act as an intermediary for institutions to convert cash into cryptocurrencies in real time and vice versa. Since 2018, the platform has more than doubled its customer base. Nearly 1,400 clients, including exchanges, family offices, and crypto companies, are represented on the network.
New agreement with MicroStrategy
Software maker MicroStrategy is now one of the clients. The most recent loan, which BTC-ECHO reported on March 29, was made through the Silvergate Exchange Network leverage program to MacroStrategy, a subsidiary of MicroStrategy, which makes loans in US dollars with Bitcoin as collateral. The loan was secured with approximately $820 million in Bitcoin, according to MicroStrategy’s press release.
The software house is now the company with the largest number of bitcoins on its own balance sheet: there are currently 125,051 bitcoins worth nearly six billion US dollars. On average, he paid around US$30,200 for Bitcoin. Saylor, who became pro-Bitcoin in 2021, is optimistic that his strategy will work. An official statement from the company says:
The SEN loan offers us the opportunity to expand our position as a leading publicly traded Bitcoin investor.
Michael Saylor, Source: MicroStrategy press release
Saylor is a Bitcoin maximalist and more long-term bullish than almost anyone. But he is also a realist and knows that an upcoming regulation that will affect the entire crypto sector is imminent. The bitcoin purist has often noted that he hopes the Biden administration will introduce regulations that clearly separate digital ownership of digital securities and digital currencies.
Stock with strong performance
Silvergate now has a proud market capitalization of around five billion US dollars. In 2021, the bank generated sales of around $176 million. The end result was a profit of US$79 million.
Silvergate Capital stock was also able to regain some ground as the crypto currency rallied (see chart below). Since the lows in late January, the price is up more than 80 percent. The newspaper was able to clearly outperform the price of Bitcoin in recent weeks. Participation was also clearly up around 25 percent for the year as a whole. For comparison: Despite the rally of the past few days, Bitcoin is still around 19 percent in the red annually.
The relatively strong performance in recent weeks can certainly also be explained by the fact that Silvergate is a bank. The banking sector is one of the beneficiaries of the increase in interest rates because it significantly improves the profit potential of banks.
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