Tether posts record Q1 profits as USDT keeps growing

Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.

The second quarter of 2024 has been off to a rocky start for crypto. Currently, down around 20% from Bitcoin’s $73,700 high, the market has been hurting from threats of world war three, sustained US inflation and what seems like an onslaught of attacks from the US government. One crypto company in particular will be missing Q1 after they just released details of its incredible performance. 

On Wednesday, the stablecoin issuer Tether released details of their Q1 2024 earnings. This quarter was their most profitable yet, recording $4.52 billion in net income. This was nearly a 60% increase over Q4 2023’s record total of $2.85 billion. Additionally, the total supply of their stablecoin, USDT, has also made a new all-time high of $110 billion.

Tether’s business model is based on users depositing fiat and receiving USDT in return to invest in crypto. Tether invests the fiat deposits primarily in short-term US Treasury bonds. For example, three-month Treasuries currently earn a yield of around 5.4%. The stablecoin issuer reports that their direct and indirect US Treasury holdings are at their highest ever – over $90 billion. These generated around $1 billion of income in Q1. Ryan Selkis of Messari Crypto estimates Tether has around 50 employees. With Q1’s $4.52 billion profit, globally this makes Tether one of the most profitable companies per employee.

During Q1, the situation for Tether was ideal. There were high US Treasury yields, an increasing demand for their stablecoin, along with increasing Bitcoin and gold prices. Currently, they are one of the largest holders of Bitcoin and have over 75,000 in their reserves worth $4.3 billion. Their gold holdings are also worth $3.8 billion. The near 69% appreciation for Bitcoin, and 8% rise in gold, is responsible for the remaining approximate $3.5 billion of profits for the quarter.

Previously, Tether said they may allocate up to 15% of their profits to purchase Bitcoin, in addition to gold. This led to them purchasing 8,888 Bitcoin in Q1. However, if Tether chooses to allocate 15% of Q1’s $4.52 billion profit to Bitcoin, that could be an additional $678 million of buying pressure until July. For Tether, another record breaking quarter will require record Bitcoin prices. However, they are also investing their profits into AI and Biotech. Their latest being a $200 million investment in BlackRock Neurotech. The company develops tools to aid paralysis and neurological disorders. 

Stablecoins may seem less exciting than other tokens and crypto businesses, but Tether is showing how tremendous scale, and diversified investments, can make them one of the most profitable businesses in the world.