Tether profits more than BlackRock
Tether has repeatedly announced stunning quarterly profit data recently, even surpassing BlackRock, the world's largest asset management company. Since the fourth quarter of 2022, Tether has accumulated profits of up to $12.72 billion, much higher than BlackRock’s $9.83 billion in the same period. However, Tether’s profits do not only come from U.S. Treasury bonds, but also include unrealized profits from Bitcoin and gold holdings, which also inflates its profit data.
According to Tether’s quarterly report, as of the second quarter of 2024, Tether’s circulation was backed by approximately $118.44 billion, and the composition of its reserve assets included short-term U.S. Treasury bonds, reverse repurchase agreements, money market funds, Bitcoin, etc. Tether’s quarterly net profit during this period was $1.3 billion, a staggering figure for a company with less than 100 employees. The main source of profits comes from its holdings of U.S. Treasury bonds, but the price fluctuations of Bitcoin have a more significant impact on its profits.
Image source: Tether Tether’s reserve asset portfolio
The impact of Bitcoin’s rise and fall on Tether’s profits
Tether’s profits come not only from U.S. Treasuries but also from unrealized gains on its holdings of Bitcoin and gold. For example, in the first quarter of 2024, the price of Bitcoin surged by nearly 70%. Tether’s net profit for the quarter reached $4.52 billion, of which Bitcoin contributed $2.08 billion, accounting for 46% of the total profit. By comparison, U.S. Treasuries accounted for 51% of profits, and gold contributed about 3% to value growth.
However, Tether’s Bitcoin holdings represent only 4% of its total reserves, but account for nearly half of its profits. Such a profit model means that when the price of Bitcoin rises, Tether's profit performance will be particularly bright, even surpassing BlackRock; but conversely, when the price of Bitcoin falls, Tether's profits will also be seriously affected. .
Source: BlockWork Tether has been increasing its Bitcoin reserves, rising from 2% of the total to 4% over the past year
For example, in the second quarter of 2024, the price of Bitcoin fell by 12%, which reduced the value of Tether's Bitcoin assets by US$648 million, causing its quarterly profit to drop significantly to US$1.3 billion, almost three points from the previous quarter. one. If Bitcoin had maintained its first-quarter highs, Tether's quarterly profits would have been closer to $2 billion. This phenomenon shows that Tether’s profit performance is highly dependent on the fluctuation of Bitcoin price.
Source: BlockWork Tether’s profits largely depend on the rise and fall of Bitcoin
Can Tether's profits continue to outperform BlackRock's?
Tether's profit-making model has allowed it to outperform BlackRock at certain times, especially when Bitcoin and gold prices rose. However, this also means that Tether’s profits are subject to higher volatility. In contrast, BlackRock's profits mainly come from its stable asset management business and are less affected by market fluctuations.
It’s worth noting that Tether doesn’t need to sell its Bitcoin or gold, just hold the assets to report profits. This model allows Tether to remain highly profitable in the cryptocurrency market, but it also exposes its reliance on market price fluctuations.
Overall, Tether is probably one of the most profitable companies in the cryptocurrency industry right now, and even globally. However, whether Tether can continue to maintain profitability beyond BlackRock still depends on the price trend of crypto assets such as Bitcoin. If the price of Bitcoin falls, Tether will be unprofitable.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
