Tether, a stablecoin issuer, is anticipating huge profits this quarter under current market conditions that favor issuers holding large amounts of short-dated, yield-bearing securities in a high interest rate environment.
Tether’s Chief Technology Officer, Paolo Ardoino, has predicted a profit of $700 million for Q1, as the company added the same amount to its Tether reserves via net profits in Q4 2022.
Tether has allocated a majority of its assets, approximately 58%, to US Treasury Bills, as highlighted in its Q4 report. According to a spokesperson, Tether has a “strong, conservative, and liquid portfolio” of short-term US Treasurys, cash, and cash equivalents.
The company’s strategy of investing in short-dated Treasury securities, such as Treasury Bills, has protected it from potential liquidity issues in the Treasury bond market.
As interest rates continue to rise, Tether is expected to reap greater profits from its yield-bearing fixed-income securities. The US Federal Reserve has increased interest rates by 75 or 50 basis points over the past year, with the latest increase being 0.25%.