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Index Plamis Crypto Focus, a new cryptocurrency index that tracks the performance of the most innovative and promising projects in the crypto space, and how it is linked to Silvergate Bank, a crypto-friendly lender that recently announced its liquidation amid sector turmoil.
Index Plamis Crypto Focus (IPCF) is a custom-made index that was launched in January 2023 by VettaFi, a leading provider of digital asset indexing and data services. IPCF aims to capture the growth potential of the emerging crypto sector by selecting and weighting the most innovative and promising projects based on their market capitalization, liquidity, innovation score, and social media presence. IPCF currently tracks 25 projects, including Aave, Algorand, Avalanche, Binance Coin, Cardano, Chainlink, Cosmos, Ethereum, Filecoin, Polkadot, Solana, Stellar, Tezos, Uniswap, and Zcash1.
IPCF claims to offer investors a diversified exposure to the crypto sector, while also reducing the volatility and risk associated with individual projects. IPCF is rebalanced quarterly and has a management fee of 0.5% per annum. IPCF is available as an exchange-traded product (ETP) on Xetra, a leading European trading venue operated by Deutsche Börse2. IPCF is also accessible through various platforms and brokers that offer access to Xetra.
However, IPCF has also been involved in a controversy regarding its relationship with Silvergate Bank, a crypto-focused lender that announced its liquidation on March 8, 20233. Silvergate Bank was one of the first traditional banks to embrace the crypto sector and offer banking services to crypto companies and investors. Silvergate Bank also operated the Silvergate Exchange Network (SEN), a proprietary payment platform that enabled fast and secure transfers between crypto exchanges and institutions4.
Silvergate Bank was a major banking partner for many of the projects included in IPCF, as well as for VettaFi itself. Silvergate Bank provided deposit accounts, lending facilities, custody services, and SEN access to these entities. However, Silvergate Bank suffered a massive loss of deposits in the fourth quarter of 2022, as many of its customers withdrew their funds following the collapse of FTX, one of the largest crypto exchanges and a major client of Silvergate Bank3. Silvergate Bank also faced regulatory scrutiny and legal challenges from its creditors and shareholders.
As a result of Silvergate Bank’s collapse, many of the projects in IPCF have been affected negatively. Some of them have lost access to their funds or faced liquidity issues. Some of them have also been accused of having conflicts of interest or nepotism with Silvergate Bank’s executives or board members. For example, Algorand’s founder Silvio Micali is also a board member of Silvergate Capital Corporation, the holding company of Silvergate Bank4. Binance Coin’s CEO Changpeng Zhao is also a close friend of Alan Lane, the CEO of Silvergate Bank5. These connections have raised questions about the integrity and independence of IPCF’s selection and weighting criteria.
IPCF’s performance has also suffered as a result of Silvergate Bank’s liquidation. IPCF has lost more than 50% of its value since its launch in January 2023. IPCF has also seen a decline in its trading volume and liquidity on Xetra. IPCF’s investors have expressed their dissatisfaction and frustration with IPCF’s management and performance. Some of them have also filed lawsuits against VettaFi and IPCF’s issuers for breach of fiduciary duty, fraud, negligence, and misrepresentation6.
IPCF’s future is uncertain as it faces multiple challenges and risks. IPCF may have to revise its methodology or composition to reflect the changing dynamics of the crypto sector. IPCF may also have to find alternative banking partners or platforms to support its operations and growth. IPCF may also have to deal with more regulatory scrutiny or legal actions from its stakeholders or authorities. IPCF may also face more competition from other crypto indexes or products that offer better returns or lower fees.
In conclusion, Index Plamis Crypto Focus is a new cryptocurrency index that tracks the performance of the most innovative and promising projects in the crypto space. However, it is also linked to Silvergate Bank, a crypto-friendly lender that recently announced its liquidation amid sector turmoil. This link has caused various problems and controversies for IPCF and its constituents. IPCF’s performance has also been negatively affected by Silvergate Bank’s collapse. IPCF’s future is uncertain as it faces multiple challenges and risks.