Discovery: Tether Holds the World's 11th Largest Bitcoin Reserve

Tether, the issuer of the USDT stablecoin, has emerged as the entity holding the world's 11th largest Bitcoin reserve, raising concerns about market manipulation.

Discovery: Tether Holds the World's 11th Largest Bitcoin Reserve

Tether's Bitcoin Holding Discovery
Despite Tether not officially disclosing its Bitcoin addresses, Tom Wan, a researcher at 21.co, claims to have identified addresses likely belonging to Tether. According to Wan, these wallets hold approximately 55,022 Bitcoins, valued at over $1.6 billion.

Further sources confirmed to The Block about this matter, noting Tether's position in global Bitcoin holdings rankings on Dune, although Tether has declined to comment.

Comparing with the Q2 2023 asset verification report featuring staggering profits disclosed earlier this week by Tether, the value of holdings aligns closely with the total Bitcoins mentioned above. As of the latest statistics, the company owns $1.5 billion worth of BTC, constituting 2% of total assets backing USDT.

Bitcoin (BTC) Insight
Tether publicly revealed its Bitcoin holdings for the first time from the first quarter of this year. According to the announcement, Tether plans to gradually reallocate reserve assets from government bonds to Bitcoin, with regular investment volumes possibly reaching 15% surplus profits per month. This decision comes as the US grapples with unresolved fiscal issues, where bonds are a risky investment avenue. Notably, the leading stablecoin issuer is ranked as the world's 23rd largest holder of US government debt.

Tether has thus far kept schedules for Bitcoin purchases and transaction values confidential but commits not to exceed 15% surplus asset levels.

Cautions with Tether's Bitcoin Holdings?
In practice, Bitcoin has proven to be one of the most effective assets of the past decade, but an organization holding such a large amount of this cryptocurrency could be a double-edged sword due to its volatile nature.

"While Tether benefits from significant profits through Bitcoin holdings, it also poses challenges," noted Wan.

Less volatile assets like cash are safer choices, Wan added:

"Tether's Bitcoin holdings amount to $1.67 billion, representing 50% of liquidity reserves. 85% of Tether's reserves are in cash, cash equivalents, and short-term deposits. Therefore, in case of a decline in value for their other reserve assets, a less volatile liquidity cushion would benefit their position."

Mikołaj Zakrzowski, a CryptoQuant researcher, echoed a similar sentiment:

"In the larger context, the increase in Tether's Bitcoin holdings may not necessarily be a major concern, as Tether also holds substantial US Treasury bonds and USD-denominated assets. However, the main issue lies in Tether contributing to dual risk, adding volatility to the company's overall reserve value."

Moreover, since Tether operates as a "pillar" in the cryptocurrency market, any adverse events affecting Tether could negatively impact Bitcoin prices and the entire market," Zakrzowski highlighted.

Tether as a "Black Box"
Due to the opacity surrounding plans to increase Bitcoin holdings, Tether has faced criticism. Notably, Binance CEO Changpeng Zhao referred to Tether's reserve reports as a "black box" during an AMA session on July 31.

Continued profitability reports across quarters have underscored Tether's leadership in the stablecoin sector, yet CZ maintains skepticism about complete reliance on USDT. According to the billionaire, diversifying across multiple stablecoins remains a priority.

Tether's Chief Technology Officer, Paolo Ardoino, previously stated, "No stablecoin has formal audits, only attestations."

Last week, Binance partnered with First Digital Labs based in Hong Kong, launching the FDUSD stablecoin and offering free trading on selected pairs. However, Binance has not extended similar gestures to Tether's USDT.

Yesterday (04/08), USDT faced selling pressure and prolonged peg loss across Curve and UniSwap pools. Tether's CTO attributed this to manipulation against their favored asset and hinted at the FDUSD's underlying mockery. Online communities also accused Binance and CZ of puppeteering.