By Adedapo Adesanya
Tether (USDT) grew rapidly in the first quarter, with its market cap growing from $66 billion to over $82 billion, while it achieved a record net profit of $1.48 billion which brought its reserves surplus to another record high of $2.44 billion.
This buffer is likely to continue growing each quarter, giving users added confidence as it allows Tether to absorb any volatility with ease.
According to its disclosure, “All of the incoming funds collected from tokens’ issuance were invested in either US Treasuries or overnight reverse repo facilities (which are fully collateralized by US Treasuries). In total, there is now $7.5 billion parked in overnight repo facilities, which provides Tether with more extremely liquid collateral while mitigating counterparty risks.”
Tether revealed that the profits, instead of being distributed to shareholders, were fully rolled into reserves to strengthen the stability of Tether for the benefit of users.
Tether’s Q1 profits were more than Blackrock’s by over $300 million dollars. Blackrock has been operating for over 30 years, whereas Tether is only a decade old. Tether profits were also higher than Netflix, Starbucks, CashApp, PayPal, and many other S&P 500 corporations.
Tether said it was able to achieve these milestones while running a fully reserved stablecoin firm, unlike banks that engage in fractional reserve to boost profits. This means when customers want to withdraw their deposits at the same time, there is a bank run and bank failures.
“Tether, in the black swan events of 2022, was able to effortlessly make redemptions of more than $20 billion within 20 days, which no other bank in financial history has been able to process without going bankrupt,” it revealed.
As of Q1, Tether’s treasury direct holdings reached an all-time high of over $53 billion, representing more than 64 per cent of total reserves.
Tether also reduced its bank deposits from $5.3 billion to $481 million in Q1. This provides a substantial reduction in Tether’s exposure to counterparty risk, particularly through bank failures, since these deposits are not concentrated in one bank but rather spread across different banks.
