In a significant diversification of its core business of managing the USDT stablecoin, Tether Holdings Ltd. is pivoting a portion of its operations toward Bitcoin (BTC) mining.

As reported by Bloomberg, Tether plans to invest approximately half a billion dollars over the next six months, a move that could significantly alter the dynamics of the highly competitive sector.

Financial position

Tether’s venture into Bitcoin mining is underpinned by its formidable financial strength, according to its Q3 attestation report, which revealed Tether has amassed a surplus of around $3.2 billion in cash. This fiscal surplus enables the company to undertake such a substantial investment, comprising part of a $610 million credit facility extended to Bitcoin mining company Northern Data AG.

Tether is constructing mining facilities in Uruguay, Paraguay, and El Salvador, with each site’s capacity ranging between 40 and 70 megawatts. Paolo Ardoino, Tether’s incoming chief executive, expressed a commitment to scaling their share of the total computing power for the Bitcoin network to 1%. While this target sets Tether on a path to becoming one of the world’s top 20 Bitcoin mining companies, it also underscores the depth of investment and ambition driving this new venture.

Tether’s entry into Bitcoin mining occurs at a delicate time, with notable players like Compute North and Core Scientific having recently filed for bankruptcy.  Tether’s strategy of setting up mobile mining facilities suggests it plans for agility in adapting to fluctuating energy costs and market conditions. As such, the stablecoin giant could emerge as a powerful force within the sector.

Still, Tether faces significant challenges in the crypto-mining landscape. With increasing competition and thinning profit margins, coupled with the impending Bitcoin halving expected to slash mining revenues next year, the company’s venture is not without risks. Moreover, mining difficulty has reached historic highs, demanding substantial computing power for profitability, a challenge even for financially robust entities like Tether.