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Record Profits, Reserve Surpluses, and USD₮ at All-Time Highs: A Look at Tether’s Q1 Attestation

Tether recently released its Q1 2023 attestation report from BDO which featured numerous significant milestones. Tether has been committed to providing the crypto industry and people around the world, with a reliable peer-to-peer cash alternative since day 1. Tether’s attestations are a critical part of its dual commitment to transparency and stability.

Record Net Profits Added to Reserves

Tether achieved a record net profit of $1.48 billion in Q1. This 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.

Secured Loans Continue to Wind Down

Tether has continued to wind down its secured loans in line with its previous commitments. They have been reduced both in net, and as a percentage of Tether's reserves from 8.7% to 6.5%. Tether’s continued commitment is to reduce secured loans to zero. However, it is worth noting that Tether has never experienced any losses on the loans, even during periods of industry crisis and high volatility, thanks to its overcollateralization and efficiency in margin calls.

US Treasury Holdings at All-Time Highs

Over the course of 2022, Tether reduced its commercial paper holdings to zero and began purchasing US Treasuries for Tether’s reserves. As of Q1, Tether’s treasury direct holdings reached an all-time high of over $53 billion representing more than 64% of total reserves. In fact, if you were to rank all of the world's countries in order of how many US Treasuries they own, Tether would be just under Mexico. These treasuries together with the other reserves included in the Cash and Cash Equivalent category (e.g overnight Repo, Term Repo, Money market funds, Cash and Bank deposits) representing an all-time high of almost 85%, provide Tether with high quality, liquid collateral that can be sold rapidly to process redemptions. At the same time, decade-high yield rates drive revenues up, increasing Tethers surplus reserves, effectively overcollateralizing USD₮.

Bank Deposits Reduced by Over 90%

Tether 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. This comes at a time when Tether’s competitors have been impaired by overexposure to bank deposits as the financial system is experiencing troubles.

If the point of a stablecoin is to provide the world with reliable, stable, peer-to-peer cash, then it is imperative that stablecoin users are insulated from as much counterparty risk as possible.

100% of All New Issuance Reserved by US Treasuries & Overnight Repo

Tether grew rapidly in Q1, with the marketcap of USD₮ growing from $66 billion to over $82 billion! 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.

Increased Transparency for Gold & Bitcoin Holdings

Tether has included categories for its Gold and Bitcoin holdings for the first time with the Q1 attestation. These holdings represented 4% of total reserves for Gold and 1.8% for Bitcoin. This is part of Tether's continued commitment to being the industry leader for stablecoin transparency. 

What Does This Show?

Tether's recently disclosed profits and its full allocation to increase its reserves, demonstrate Tether’s commitment to its token stability and positions it quite favorably among financial institutions.

Tether's profits, instead of being distributed to shareholders, are fully rolled into reserves. This strengthens the stability of Tether for the benefit of users.

Tether reported higher Q1 profits than Blackrock by over $300 million dollars. Blackrock has been operating for over 30 years, whereas Tether is only a decade old.

Tether reported higher Q1 profits than Netflix, Starbucks , Cash App , Paypal and many other S&P 500 corporations.

Tether achieved 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. 

These milestones would not be possible without the support and trust the cryptocurrency industry has placed in us.  

Other Tether Milestones

Tether is the only stablecoin to have regained its all-time high market cap after the Terra Luna collapse and subsequent bear market. USD₮ recently began to see new highs as capital has flowed into Tether seeking a more reliable stablecoin option. Tether’s main competitors are trading more than 40% below their all-time high market caps.

This is representative of investors and users choosing USD₮ as their primary stablecoin, and exiting other stablecoin positions.

Further evidence for the demand for USD₮ can be seen in the fact that USD₮ has been trading at a premium ever since March when the banking crisis started in the US.

Tether is committed to continuing to make the sort of decisions that have allowed us to increase adoption and users’ trust. This includes our commitment to continuing to improve our reserve mix as market conditions change (shrinking bank deposits, increasing treasuries) and ensuring that reserves are not concentrated in a single jurisdiction.

Ultimately, the responsibility of a stablecoin isn’t just ensuring redemptions at $1 via a conservative portfolio model, it is also about protecting against black swan events that could impair operations (regulatory changes, banking crises).

Tether is committed to navigating the ever-changing macroeconomic landscape for its users, who have trusted Tether for the last nine years to provide the most reliable stablecoin in the market.

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