Tether Holdings Ltd., predominantly known for its $87 billion stablecoin operation, is now entering the competitive realm of Bitcoin mining. Paolo Ardoino, the incoming chief executive, outlined a strategic plan involving a substantial investment of approximately $500 million over the next six months. This decision signifies a notable diversification for Tether, which has primarily been focused on managing USDT, a stablecoin pegged to the U.S. dollar.
The investment will be allocated towards constructing new mining facilities and acquiring stakes in existing mining companies. A significant portion of this investment includes a $610 million credit facility extended to Northern Data AG, a publicly-traded Bitcoin mining company, in which Tether had already acquired shares. This move demonstrates Tether’s commitment to becoming a significant player in the Bitcoin mining ecosystem.
Strategic locations and ambitious goals
Tether’s mining operations are set to span across Uruguay, Paraguay, and El Salvador, with each site’s capacity ranging between 40 and 70 megawatts. Ardoino’s plan targets a growth in Tether’s share of the total computing power of the Bitcoin network to 1%, a goal set to be achieved in phases. By the end of 2023, Tether expects to reach 120 megawatts across its mining operations, with a longer-term projection of achieving up to 450 megawatts by the end of 2025.
This expansion would position Tether among the world’s top 20 Bitcoin mining companies, according to Jaran Mellerud, CEO of Bitcoin mining data firm MinerMetrics. Mellerud notes that given Tether’s significant role in the crypto ecosystem and its substantial financial resources, its market share is expected to grow well beyond the initial 1% target.
Challenges and competitive landscape
Despite the bold move, Tether faces a competitive and challenging environment. The Bitcoin mining sector has experienced financial strains due to the recent downturn in digital asset prices, leading to liquidity issues and bankruptcies among prominent players. Additionally, the upcoming Bitcoin code update, known as the halving, is predicted to reduce mining revenues significantly.
Furthermore, the increasing mining difficulty, a measure of the computing power required to earn new Bitcoin tokens, has reached historic highs. This situation favors companies like Tether, which have the financial muscle to invest in additional computing power, giving them a competitive edge.
Ardoino, while acknowledging the challenges, remains optimistic. Tether’s mining operations are already turning a profit, aided by recent increases in Bitcoin’s price. The company’s strategic approach includes deploying mining facilities in large containers for flexibility and mobility, allowing them to adapt quickly to changing market conditions.