By
Bhushan Akolkar
April 30th, 2024
Tether’s strong financial muscle and deep pockets will help it position strongly among other competitors in the Bitcoin mining space.
In a major revelation, Tether chief executive Paolo Ardoino announced that the company is eyeing a move in the Bitcoin mining market. As per reports, the $87 billion stablecoin operator has already made hefty investments in the Bitcoin mining sector.
Ardoino revealed in an interview that the company intends to invest approximately $500 million in the next six months. This investment will involve the construction of its mining facilities and acquiring stakes in other companies. As part of this strategy, Tether has allocated a portion of the $610 million credit facility it extended to the publicly-traded Bitcoin mining company, Northern Data AG, earlier this month. Tether had previously acquired shares in the Frankfurt-based firm back in September. Speaking on the development, the Tether chief said:
“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.”
However, stepping into Bitcoin mining will mark a notable departure from Tether’s core business. Considering that Tether has already deep pockets, it will certainly send shockwaves among competitors in the Bitcoin mining industry. Jaran Mellerud, chief executive at Bitcoin mining data and research firm MinerMetrics said:
“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 Raising the Competition Bar
Tether is in the process of establishing Bitcoin mining facilities in Uruguay, Paraguay, and El Salvador, each with a capacity ranging from 40 to 70 megawatts. The goal is to increase Tether’s share of the total computing power required for the Bitcoin network to 1%. However, no specific timeframe for achieving this goal was provided. For context, the largest public Bitcoin mining company, Marathon Digital Holdings, contributes around 4%.
By the end of 2023, Tether aims to reach 120 megawatts in its direct mining operations, with a further projection of reaching up to 450 megawatts by the end of 2025. The company has allocated approximately $150 million for mining opportunities in which Tether is directly involved, with some funds still being deployed across new sites.
The broader Bitcoin mining industry has faced financial challenges following the decline in digital asset prices last year, leading to liquidity concerns. Notably, major players such as Compute North and Core Scientific have filed for bankruptcy.
“Being a private company that generates enormous amounts of cash even in the bear market, Tether is uniquely positioned to make massive anti-cyclical investments,” Mellerud said.
Tether is currently assessing a site with a capacity of 300 megawatts, and its mining operations are already profitable due to the recent increases in Bitcoin prices. To enhance flexibility, the company has established its facilities within large containers, allowing for swift relocation to new locations in case electricity costs become more favorable elsewhere.
“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,” Ardoino said.