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Yesterday, the financial world witnessed a classic run on the bank when Silvergate Capital, the go-to US lender for crypto companies, said it would wind down its operations and voluntarily liquidate.

ICYMI: Silvergate was, for most of its existence, a traditional Southern California regional bank. But by 2018, it had pivoted to crypto, recognizing that young digital asset firms were struggling to establish relationships with larger mainstream banks. Silvergate positioned itself as a conduit for these new companies that other institutions viewed with a mix of skepticism and disdain. It was a pretty shrewd business move at the time. But Silvergate went all in on crypto, and left itself overexposed in the crash that began last year.

As Bloomberg’s Max Reyes writes:

“After hitching its wagon so firmly to the new world of crypto, the bank had exposed itself to an old-world banking risk: When the industry’s prospects soured, Silvergate had little other business to lean on.”

The bank’s shares have cratered 98% from their November 2021 high. In the same period, the global crypto industry has lost two-thirds of its value, falling from a $3 trillion market cap to $1 trillion.

BIG PICTURE

If you’re in the crypto biz at this moment, you’re working under a long, dark shadow cast by Sam Bankman-Fried, the entrepreneur who became a pariah when his crypto empire collapsed last year. That event sparked a rash of bankruptcies and put the entire industry on watch.

If traditional finance folks and regulators saw crypto as something of a nuisance before, FTX’s collapse and the criminal indictments that followed turned the market radioactive. The closer you were to FTX, the more trouble you could be in.

“There’s a