In a significant development, Tether, a prominent stablecoin issuer, has quietly risen to become the 11th largest holder of Bitcoin globally. This revelation has ignited curiosity and speculation within the cryptocurrency market regarding the potential impact the firm could wield. While Tether has refrained from officially disclosing its Bitcoin addresses, Tom Wan, a research analyst at 21.co, claims to have identified an address that is potentially linked to the firm.
Tether address holds about $1.6 billion Bitcoin
This Tether address is said to currently hold approximately 55,022 bitcoins, with an estimated value of around $1.6 billion. Rankings reflecting the firm’s position as the 11th-largest Bitcoin holder are also upheld by Dune Analytics, as reported by 21.co. Tether, however, chose not to comment on the matter. The reported Bitcoin holdings align with figures cited in Tether’s second-quarter reserves report, which was recently published.
In a pivotal move earlier this year, the company disclosed its Bitcoin holdings for the first time, unveiling its commitment to investing up to 15% of its profits regularly in Bitcoin. This strategic shift aims to transition its reserves from traditional U.S. government debt to cryptocurrencies. Tether clarified that it aims to ensure its Bitcoin holdings remain within the bounds of the “Shareholder Capital Cushion,” a liquidity buffer placed on top of the total market capitalization of all Tether tokens.
Despite Bitcoin’s reputation as one of the best-performing assets, experts caution against overexposure due to its inherent volatility. “Being a high-beta asset, Bitcoin could bring a higher return for Tether and a greater downside,” warns Tom Wan of 21.co. Given this high volatility, research analysts emphasize the merits of a less volatile asset, such as cash, as a safer option for a liquidity cushion.
Implication of the company’s role in the crypto landscape
Wan points out that Tether’s Bitcoin holding constitutes half of the liquidity cushion, and a less volatile alternative could better safeguard their position in the event of price drawdowns in other reserve assets. Mikołaj Zakrzowski, a research analyst at CryptoQuant, echoes this sentiment, acknowledging that while Tether’s increased Bitcoin holdings don’t necessarily raise immediate concerns due to its holdings in U.S. Treasuries and dollar-denominated assets, it does compound risk by introducing additional volatility into the stablecoin’s backing reserves.
Tether’s role as a foundational pillar in the cryptocurrency market further amplifies the implications of its actions. Any adverse events affecting the company could potentially reverberate through the market, impacting the value of Bitcoin and the wider cryptocurrency ecosystem. The firm’s lack of comprehensive audits has long drawn criticism from industry participants. Despite publishing attestation reports, the absence of formal audit reports has led to concerns.
Binance’s co-founder and CEO, Changpeng Zhao, recently referred to the firm as a “black box” during an ask-me-anything session, highlighting the need for greater transparency. Notably, Binance’s recent partnership with First Digital Labs, which introduced the First Digital USD stablecoin, garnered attention. While Binance offered free trading for select First Digital USD pairs, it did not extend the same courtesy to Tether’s USDT pairs. Paolo Ardoino, the firm’s CTO, appeared to comment on this development, suggesting that certain market movements were “organic” rather than manipulative.
Tether’s emergence as a significant Bitcoin holder has captured the attention of the cryptocurrency community, sparking discussions about potential market impact and risks. As the cryptocurrency landscape continues to evolve, Tether’s strategic decisions, particularly its Bitcoin holdings, hold implications not only for its stability but also for the broader digital asset ecosystem. The ongoing debate around audits and transparency underscores the need for robust oversight and disclosure within the cryptocurrency industry.