Tether's Business Model Pays Off

September 21, 2020 10:14 PM
Crypto story of the day

Crypto story of the day





Crypto was selling off this morning with risk assets globally, led lower by ethereum and associated tokens. Spot volumes are approximately 75% of the 30-day average.


Tether is having another great month of asset gathering. The company operates one of the most profitable and impressive businesses in crypto.

At the beginning of the month, we wrote about U.S. dollar tether (USDt) market cap growth on the back of general interest in crypto and decentralized finance (DeFi). Our piece followed a record August for the stablecoin which saw asset growth of over USD 3 billion. In September, the stablecoin has already seen approximately USD 2 billion of growth putting total market cap gains for the calendar year in the range of  USD 9.5 billion or well over 200% growth. It is worth noting that USD Coin (USDC) has also seen impressive market cap gains in the calendar year, growing from just under USD 500,000 to 2.3 billion now.

Tether is undeniably one of the best businesses in the industry. Running a stablecoin effectively involves holding bank accounts, having an accounting system, and a process for subscription and redemptions. If one assumes Tether is able to invest customer assets in high-grade fixed income instruments earning 2% annualized, they would earn USD 304 million alone with existing assets. This with having modest personnel and little overhead to speak of. Furthermore, the DeFi development, with its uncertain regulatory status, seems to play further into the hands of USDt. Coins like USDC, with very clear regulatory frameworks, may have more issues becoming the payment rails for the sub-sector, particularly when administrators begin to gain a greater understanding of some of the dynamics occurring there.


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FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets. You can subscribe to FRNT Financial Morning Note at https://www.frnt.io/morningnote