Tether Holdings Ltd., primarily known for managing the USDT stablecoin, is embarking on an ambitious journey to become a leading player in Bitcoin mining. The company plans to invest approximately $500 million in the next six months, as revealed by Paolo Ardoino, the incoming chief executive. This strategic move is not just about constructing its own mining facilities but also includes acquiring stakes in other companies. Recently, Tether extended a $610 million credit facility to Northern Data AG, a publicly traded Bitcoin mining company, after purchasing shares in the Frankfurt-based firm in September.
This initiative marks a significant shift from Tether’s core business of operating USDT, a cryptocurrency pegged to the dollar with a reserve of cash and cash-equivalent assets. Ardoino emphasized the company’s serious commitment to being an integral part of the Bitcoin mining ecosystem. The move is seen as a way for Tether to diversify its revenue streams. Currently, Tether generates income from managing the assets in USDT’s $87 billion reserve, accruing about $3.2 billion in excess cash as of September 30.
Setting the stage: Tether’s mining roadmap
Tether’s plan includes setting up Bitcoin mining farms in Uruguay, Paraguay, and El Salvador. Each site’s capacity will range between 40 and 70 megawatts, aiming to grow Tether’s share of the total computing power of the Bitcoin network to 1%. According to Jaran Mellerud, CEO of Bitcoin mining data firm MinerMetrics, achieving a 1% market share would place Tether among the world’s top 20 Bitcoin mining companies. He also notes Tether’s potential to expand its market share significantly, given its financial strength and central role in the crypto ecosystem.
By the end of 2023, Tether aims to reach 120 megawatts across its direct mining operations, with a long-term goal of hitting 450 megawatts by the end of 2025. Approximately $150 million of the investment is allocated for mining opportunities where Tether is directly involved, some of which are still being deployed across new sites.
Challenges and opportunities ahead
Tether’s foray into Bitcoin mining comes at a time when the industry faces significant challenges. The crypto-mining sector has experienced a liquidity crunch following the plunge in digital-asset prices. This has led to bankruptcy filings by prominent mining companies like Compute North and Core Scientific. Moreover, the upcoming Bitcoin halving event is expected to reduce mining revenues significantly.
Despite these challenges, Tether’s entrance into the mining arena could be transformative. As a private company with substantial cash reserves, Tether is in a unique position to make counter-cyclical investments, potentially reshaping the competitive landscape. Additionally, the company’s strategy of setting up mining facilities in large containers offers flexibility and agility in responding to changes in electricity costs.
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