(Bloomberg) -- Tether Holdings Ltd. is taking steps to become one of the world’s top Bitcoin miners, as the $87 billion stablecoin operator makes a hefty investment in the already highly competitive sector.

The company plans to spend about half a billion dollars over the next six months, its incoming chief executive Paolo Ardoino said in an interview, both through constructing its own mining facilities and by taking stakes in other companies. 

That investment includes part of a $610 million credit facility that Tether had extended to publicly-traded Bitcoin mining company Northern Data AG this month, after acquiring shares in the Frankfurt-based firm in September. 

“We are committed to being part of the Bitcoin mining ecosystem,” Ardoino said. “When it comes to the expansions, building new substations and new sites, we are taking them extremely seriously.” 

The venture marks a departure from Tether’s main business: running the USDT stablecoin, a cryptocurrency that aims to keep a one-to-one value with the dollar by relying on a reserve of mainly cash and cash-equivalent assets. The entrance of a company with such deep pockets could serve to shake up the competition for the cryptocurrency’s finite token supply, as well as provide another avenue for Tether to diversify where its profits come from.

Tether makes money from managing the hoard of US Treasury bills and other assets in USDT’s $87 billion reserve, amassing a pile of around $3.2 billion in excess cash as of Sept. 30. It’s already used some of its profits to invest more than $800 million this year in a variety of industry research-related fields, according to a quarterly attestation of its books published on Oct. 31, including Bitcoin.

Read: Tether’s Frontman Inherits Crypto’s $84 Billion Behemoth

Mining is an energy-intensive process that’s used to validate transactions on Bitcoin’s underlying blockchain, gifting miners new tokens in return for the upfront cost of running the network. Mining companies use tens of thousands of specialized computers to make sure transactions happen, and have raised billions from lenders or the stock market to fund their activities.

Tether is building Bitcoin mines in Uruguay, Paraguay and El Salvador, Ardoino said, with the capacity for each site ranging between 40 and 70 megawatts. Its target is to grow its share of the total computing power to run the Bitcoin network to 1%, Ardoino said, declining to specify a timeframe for meeting that goal. That’s compared to the largest public Bitcoin mining company Marathon Digital Holdings, which contributed about 4%. 

“A 1% market share would likely make Tether among the world’s 20 largest Bitcoin mining companies,” said Jaran Mellerud, chief executive at Bitcoin mining data and research firm MinerMetrics. “Given Tether’s importance in the crypto ecosystem and its financial muscle, its market share over time will likely grow far beyond its initial 1% goal.”

Tether expects to reach 120 megawatts across its own direct mining operations by end of 2023, Ardoino added in an emailed statement, with a projection of reaching up to 450 megawatts by the end of 2025. It’s allocated around $150 million to spend on mining opportunities where Tether’s directly involved, he added, some of which is still being deployed across new sites. 

Fresh rivalry

Aside from becoming a miner itself, Tether’s pledge to make a hefty investment in the industry may have an outsized impact on its future competitors.

Bitcoin miners have been cash-strapped since digital-asset prices plunged last year, pushing a number of players to warn of a liquidity crunch. Two of the largest crypto-mining companies, Compute North and Core Scientific, filed for bankruptcy. 

Meanwhile, opportunities in debt financing have all but dried out. Companies that had gone public during Bitcoin’s heyday are selling shares to supplement their cash flow, capitalizing on a recent rebound in Bitcoin’s price above $37,000.

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“Being a private company that generates enormous amounts of cash even in the bear market, Tether is uniquely positioned to make massive anti-cyclical investments,” Mellerud said. 

Headwinds remain, though, even for Tether. Increasing competition means thinning profit margins, and an upcoming update to Bitcoin’s code known as the halving is set to reduce mining revenue drastically next year.

Mining difficulty — a closely-watched measure of the total computing power required to earn new Bitcoin tokens — has broken historic highs several times this year, as miners keep deploying rigs. The more computing power a miner has, the more likely it can earn a share of the rewards, providing an advantage to deep-pocketed companies that can allocate extra resources.

Tether is presently evaluating a potential site with 300-megawatt capacity, Ardoino said, with its mining operations already profitable thanks to Bitcoin’s price increases. The company has also set up its facilities inside large containers, so they can be quickly shifted to new locations should electricity become cheaper elsewhere. 

“Mining for us is something that we have to learn and grow over time,” Ardoino said. “We are not in a rush to become the biggest miner in the world.” 


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