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Is Silvergate stock a ‘buy’ after it suspended preferred stock dividend?

  • Silvergate Capital Corp suspends dividend on its preferred stock.
  • Wedbush Securities analyst reiterates his neutral rating on “SI”.
  • Silvergate stock is currently down over 85% since mid-August.

Silvergate Capital Corp ended 5.0% down on Friday after the crypto bank suspended dividend on its preferred stock.

Silvergate is trying to preserve capital

The embattled digital currency services company is cutting back on the payout to preserve capital. Its press release reads:

This decision reflects the Company’s focus on maintaining a highly liquid balance sheet with a strong capital position. Company continues to maintain a cash position in excess of its digital asset customer related deposits.

The California-based company also confirmed that its Board will re-evaluate the quarterly payment once market conditions improve.

Silvergate stock has lost over 85% since mid-August, related partially to the FTX collapse. Consequently, billionaire investor Cathie Wood almost entirely pulled out of it at the start of the new year.

Is Silvergate stock a buy?

According to a Wedbush Securities analyst, suspending Series A preferred stock dividend will make things more difficult for this financial infrastructure solutions firm in the long run.

Reiterating his “neutral” rating on the Silvergate stock on Friday, David Chiaverini said:

We believe this move could raise Silvergate’s cost of capital down the road when Silvergate attempts to tap the capital markets for a future capital raise. Any new fixed income or preferred issuance will require a higher coupon.

His $13 price objective on the stock suggests it lacks any upside whatsoever. Earlier in January, Silvergate Capital Corp said average deposits from digital asset customers tanked 39% to $7.3 billion in its fourth quarter as Coin Journal reported here.

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Moody’s is building a scoring system for stablecoins: report

  • Moody’s wants to build a scoring system for stablecoins as the market grows amid increased regulatory attention.
  • The system will provide an rating system for the top stablecoins based on quality of their reserve attestations.
  • The leading stablecoins by market cap today are Tether (USDT), USD Coin (USD) and Binance USD (BUSD).

Moody’s Corporation, a leading global credit-ratings company, is reportedly developing a scoring system for the stablecoin industry.

A report by Bloomberg that cited sources familiar with the development, noted that Moody’s solution will not be an official credit rating. However, the integrated risk assessment giant is looking to deliver a platform that offers a scoring system based on a comprehensive analysis of the world’s largest stablecoins.

Moody’s already has a footprint in the crypto space, with major digital asset companies such as Coinbase getting credit ratings from the US-based provider. The credit rater also has a research unit that offers access to analytic reports touching on various issues in the crypto industry.

According to the report, the new system will offer access to ratings for up to 20 stablecoins, with the company utilizing the latest technology to score the asset-backed tokens. Among the most important metrics to consider will be the reserves and quality of attestations for each of the stablecoins.

People familiar with the project say its development is still in the early stages.

Moody’s to score major stablecoins

Stablecoins allow holders to participate in the crypto market, including in value transfer without being overly exposed to potentially high volatility characteristic of cryptocurrencies such as Bitcoin, Ethereum and so on.  But they are not without risks, particularly liquidity and manipulation.

It’s these issues that have seen stablecoins increasingly fall into regulatory spotlight, especially around reserves as they must maintain a 1:1 backing to the issued tokens.

Various issuers have attestation reports to ascertain indeed every stablecoin token is backed. But regulators want to see the sector streamlined to better protect investors. As CoinJournal recently reported, Bitwise Chief Compliance Officer Kathrine Dowling believes US stablecoin regulation will be ready before the end of 2023.

The top stablecoins today

The US dollar-pegged Tether (USDT) is the largest stablecoin with over $67.3 billion worth of tokens in circulation. USD Coin (USDC), another dollar backed stablecoin, follows with $43.2 billion coins in circulation. Meanwhile, Binance USD (BUSD) is the third largest with just over $15.4 billion worth of the tokens circulating.

According to data from CoinGecko, the stablecoin market capitalization currently stands at over $137 billion. More than $68 billion was traded in the past 24 hours as of 13:20 pm ET on 27 January, 2023.

The post Moody’s is building a scoring system for stablecoins: report appeared first on CoinJournal.