Silvergate Capital Just Got Cut in Half. The Smart Money Saw it First.

Silvergate Capital Just Got Cut in Half. The Smart Money Saw it First.

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The bears have been stacking up their positions in Silvergate Capital for three weeks now. First, a purchase of 10,000 ATM monthly puts with the stock trading at $14.43. Then a follow-up purchase: 2,500 more OTM April puts with the stock trading even higher, at $16.55. Then another double-down — this time in the form of 2,900 ATM put weekly’s, with SI stock trading at $14.07. What happened next was nothing short of incredible.

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Shares of Silvergate capital were cut in half. 

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What Happened to Silvergate Capital?

In short: Silvergate Capital (a bank which works closely with crypto institutions) delayed the release of its annual 10K filing. In light of what’s happened over the past year with similar crypto institutions, that gave investors a big cause for alarm. Specifically, Silvergate said it needed more time to complete its audit procedures, caused by certain regulatory inquiries and investigations.

Specifically, Silvergate was referring to the sale of securities beyond what was expected, and how those larger-than-expected sales would impact its business. As a result, several analysts downgraded Silvergate Capital.

Steven Alexopoulos of JPMorgan said,

“The losses from the securities sales appear large enough to result in Silvergate calling out that it may now be less than well capitalized on its regulatory capital ratios.”

Silvergate capital is currently under investigation by the Department of Justice over its dealings with FTX and Alameda Research.

Get In on the Action: Follow the Smart Money With Us

Whether bearish or bullish, the big institutions on Wall Street have a knack for predicting upcoming events and their effect on stock prices. Silvergate Capital’s big bearish plummet is far from the only example. 

Not long ago, Market Rebellion identified a colossal OTM call-spread purchase in Coupa Software — an under the radar software company. Days later, the company was bought out for a share price exactly one dollar above the short leg of the call spread. The examples aren’t just recent, either. 

Shortly before Gamestop shares took off in 2021 and taught the public the meaning of the phrase short-squeeze, Market Rebellion Co-Founder Jon Najarian was on live TV talking about the unusual bullish activity that he’d been witnessing in the video game retailer. 

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