Higher-than-expected deposit withdrawals by customers at Silvergate Capital are ringing the alarm at JPMorgan. Analyst Steven Alexopoulos downgraded shares of the cryptocurrency company to neutral from overweight, citing concerns as client deposits decline. Silvergate on Thursday disclosed preliminary fourth-quarter results that showed a 68% drop in total deposits as FTX erupted in scandal. The company also shared a loss of $718 million as it sold $5.2 billion of debt securities to raise cash. “While the challenging backdrop for the crypto settlement business was a factor in the worse than expected results being released, we also believe that concerns voiced by short-sellers (on Twitter) likely also contributed to Silvergate’s customers withdrawing deposits from the platform at a greater than anticipated level,” Alexopoulos wrote Friday. “The implications to the company’s business from the significant reduction in client deposits has near- as well as longer-term impacts,” he added. Thursday’s news pushed shares down more than 42% on the day. The stock fell another 17% before the bell on Friday. Silvergate also shared plans to reduce its workforce by 40%. While Alexopoulos expects deposit balances to potentially normalize toward late 2020 levels, the loss of confidence in crypto will likely to further pressure shares prices. The sharp reduction in deposits may also force the company to hold higher levels of liquidity which could hurt profitability longer term. “With the landing point for deposits a wildcard as well as the eventual spread that the company could earn on those deposits also a wildcard, the long-term earnings power of the company remains a question mark,” he wrote. Shares of Silvergate plummeted more than 88% in 2022 and an additional 28% since the start of 2023. The bank’s revised $14 price target suggests shares could gain about 11% from Thursday’s close. — CNBC’s Michael Bloom contributed reporting