Tether, the giant in the stablecoin realm with an impressive $87 billion in circulation, is making a seismic shift towards the world of Bitcoin mining.
Paolo Ardoino, poised to assume the reins at Tether, has revealed a bold plan to channel approximately $500 million into a strategic expansion within the Bitcoin mining sector over the next six months.
Tether’s Grand Ascent into Bitcoin Mining
In a recent interview with Bloomberg, Paolo Ardoino shed light on Tether’s ambitious foray into Bitcoin mining, outlining a multifaceted strategy.
The forthcoming investment encompasses not only the construction of new mining facilities but also the acquisition of stakes in existing mining entities, amplifying Tether’s presence and influence in the sector.
This substantial financial commitment is bolstered by a $610 million credit facility, previously extended by Tether to publicly-traded Bitcoin mining company Northern Data AG, following Tether’s acquisition of shares in the Frankfurt-based firm back in September.
Ardoino emphasized Tether’s unwavering commitment to its newfound venture, stating, “We are committed to being part of the Bitcoin mining ecosystem.
When it comes to the expansions, building new substations and new sites, we are taking them extremely seriously.”
This strategic pivot marks a significant departure from Tether’s primary business of managing the USDT stablecoin, which strives to maintain a one-to-one value pegged to the US dollar through a reserve primarily composed of cash and cash-equivalent assets.
Tether boasts an impressive financial arsenal, with profits derived from its management of US Treasury bills and other assets within the $87 billion USDT reserve. As of September 30th, the company had amassed approximately $3.2 billion in excess cash.
Tether has already harnessed a portion of these profits to allocate over $800 million throughout the year for various research-related endeavors, including substantial investments in the world of Bitcoin.
To realize its ambitious mining goals, Tether is laying the groundwork for mining facilities in Uruguay, Paraguay, and El Salvador.
Each of these sites is projected to have a formidable capacity ranging between 40 and 70 megawatts, a testament to the scale of Tether’s ambitions.
The Path to Dominance
Tether’s objective is nothing short of extraordinary – to command 1% of the total computing power driving the Bitcoin network.
While Ardoino refrained from specifying a precise timeline for this goal, achieving it would place Tether among the world’s top 20 Bitcoin mining companies.
Jaran Mellerud, CEO of MinerMetrics, remarked, “A 1% market share would likely make Tether among the world’s 20 largest Bitcoin mining companies.
Given Tether’s importance in the crypto ecosystem and its financial muscle, its market share over time will likely grow far beyond its initial 1% goal.”
Tether anticipates reaching an impressive 120 megawatts across its proprietary mining operations by the end of 2023, with an even more ambitious projection of scaling up to 450 megawatts by the close of 2025.
The company has allocated around $150 million to be invested directly in mining opportunities, some of which is earmarked for deployment in new mining sites.
In contrast, Tether’s substantial war chest positions it uniquely to make counter-cyclical investments, buoyed by its private status and ability to generate substantial cash reserves even during bear markets.
Nonetheless, Tether faces its share of challenges, including intensifying competition and the imminent Bitcoin code update known as the halving, which threatens to significantly reduce mining revenue in the coming year.
Mining difficulty, a critical metric that gauges the total computing power required to earn new Bitcoin tokens, has repeatedly soared to historic highs in recent times.
Tether, however, remains resilient and adaptable, evaluating potential sites with 300-megawatt capacity while keeping profitability intact thanks to Bitcoin’s resurgent price trajectory.
In a world where Tether’s dominance is increasingly felt, Ardoino remains pragmatic, emphasizing that “Mining for us is something that we have to learn and grow over time. We are not in a rush to become the biggest miner in the world.”
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