Tether Holdings Ltd, the company behind the world’s most traded dollar-denominated stablecoin – USDT, has announced plans to diversify its revenue streams by betting big on Bitcoin mining.
Speaking to Bloomberg, Tether CEO Paolo Ardoino said that the stablecoin issuer intends to invest $500 million into various Bitcoin mining initiatives over the next six months. This includes the construction of its mining facilities and buying stakes in existing ventures.
Tether Diversifies Its Business Model To Include Bitcoin Mining
Arduino noted that the company is taking a very serious approach to its new business model. The occasion marks a much-needed departure for Tether from its sole business venture, managing the $87 billion USDT stablecoin.
The company holds a hoard of US Treasury bills and other cash-equivalent assets to back the stablecoin that maintains a one-to-one value with the US dollar. USDT is the most traded cryptocurrency in the world, averaging daily trading volumes in the range of $50 billion.
The company has been faced with market and regulatory challenges regarding its stablecoin. Recently, asset management giant BlackRock mentioned USDT in the risk disclosure for its upcoming Bitcoin spot ETF.
As per its Q3 earnings report, Tether amassed close to $3.2 billion in excess cash, from which, $800 million was used to invest in a variety of crypto research fields including Bitcoin.
Tether Targets 450 MW Output From Its Bitcoin Mining Facilities In Paraguay, Uruguay, and El Salvador
Arduino said that Tether plans to build Bitcoin mining farms in Uruguay, Paraguay, and El Salvador, with each site capable of outputting 40 to 70 megawatts of energy. However, the crypto giant’s main aim is to achieve output equivalent to 1% of Bitcoin’s network hashrate – the computational power used by miners to validate and process transactions on the Bitcoin network.
Currently, Bitcoin mining firm Marathon Digital Holdings has the largest hash rate at 4%.
Jaran Mellerud, the CEO of Bitcoin mining data and research firm MinerMetrics said that given Tether’s importance in the crypto ecosystem and its “financial muscle”, a 1% market share would likely place the stablecoin issuer among the world’s largest Bitcoin mining companies. He also noted that over time, Tether’s market share in the sector will grow “far beyond” the initial 1% goal.
In an email to Bloomberg, Arduino wrote that Tether expects to reach a target of 120 megawatts across its various mining operations by the end of the year. This also includes Frankfurt-based Bitcoin mining company Northern Data AG, in which Tether had acquired shares back in September.
What Tether Is Aiming By 2025
Tether has allocated around $150 million to spend on mining opportunities where it is directly involved. The company projects to achieve 450 megawatts from its Bitcoin mining operations by 2025.
Mellerud highlighted that as a private company that generates “enormous” amounts of money even in the bear market, Tether is “uniquely positioned” to make “massive anti-cyclical investments”. The analyst also noted that the crypto firm’s hefty investment may have an outsized impact on its competitors.
Miners have been going through a difficult time since Bitcoin’s price took a deep dive last year. This resulted in several big players in the sector warning of a liquidity crunch. The bear market even caused two of the largest Bitcoin mining companies, Compute North and Core Scientific, to declare bankruptcy.
Crypto mining firms that had gone public when Bitcoin was performing at its historic best in 2021 are now selling shares to supplement their cash flow. They are capitalizing on Bitcoin’s recent surge above the $35,000 mark.
Tether’s Deep Pockets Could Make It a Leader In The Bitcoin Mining Sector
However, headwinds are coming in Tether’s way. Mining is one of the most closely contested sectors in the crypto industry, and increased competition could result in thinning profit margins. Miners also need to be wary of the Bitcoin halving event coming next year, which is set to cut mining rewards in half.
Mining difficulty – the unit of measuring the total computing power required to create a block on the Bitcoin network – has hit historic highs several times this year, largely due to more companies entering the market. The higher the hash rate a miner has, the more likely that they earn new Bitcoins. Therefore, companies with deep pockets like Tether have a major advantage over the rest as they can allocate additional resources to their mining operations.
Tether is currently planning on developing a facility with a mining capacity of 300 megawatts. Apart from that, the company has also set up mining rigs in large shipping containers that can be easily transported to newer locations.
Concluding his statement, Arduino said crypto-mining is something that Tether still has a lot to learn about and it is not in a rush to become the “biggest miner in the world”.