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Tether Invests in Europe’s Largest Bitcoin Miner as Reserve BTC Holdings Return to Growth

Last Updated November 6, 2023 11:26 AM
James Morales
Last Updated November 6, 2023 11:26 AM

Key Takeaways

  • Tether has invested in Northern Data Group, which dominates the EU BTC mining space.
  • Following previous investments, Northern Data has secured a €575M debt facility from the stablecoin issuer.
  • Meanwhile, the value of Tether’s Bitcoin reserves declined in Q3 but recovered in October.

Over the years, Tether has adjusted its USDT reserves policy to reflect the needs and demands of the stablecoin’s users. Although US treasuries have always formed the bulk of Tether’s reserves, the company also holds Bitcoin, but the value of its holdings can fluctuate wildly.

The Tether Group is also committed to the cryptocurrency away from USDT reserves, however, and recently invested in Europe’s largest Bitcoin Miner.

Tether Invests In German Tech Giant Northern Data

In September, Tether announced a strategic investment in Northern Data Group, a German technology conglomerate that became Europe’s largest Bitcoin miner when it acquired Decentric in 2021.

The unusual deal saw Tether acquire an undisclosed stake in Northern Data, which received a majority stake in Tether subsidiary Damoon in exchange. The complex arrangement centers around Damoon’s purchase of 400M euros worth of highly sought-after Nvidia H100 GPUs.

As part of the partnership, Tether and Northern Data will collaborate on “initiatives that aim to leverage AI, peer-to-peer communications, and super-resilient data storage solutions,” Tether said in a statement.

Northern Data Group
Northern Data Group is a key player in the European data center market.

“We are excited about this investment into Northern Data Group as it represents a fresh venture into new technological frontiers,” CEO Paulo Ardoino commented.

As well as swapping equity for GPUs, on Thursday, November 2, Northern Data announced that it had secured a 575M euro debt financing facility from the stablecoin issuer.

In a press release , Northern Data said it would use the credit line to grow its cloud business Aiga Cloud, an AI-focused service provider that was the beneficiary of Damoon’s H100 chips. The debt facility will also help Northern Data expand its portfolio of data centers and scale its Bitcoin mining capacity, the statement added.

While Tether’s latest arrangement with Northern Data will give it a foothold in the European Bitcoin mining market, such investments exist separately from Tether’s $86B USDT reserves.

The loan facility “will be covered using the company’s profits and will not be part of Tether’s stablecoin consolidated reserves,” Ardoino explained in a statement shared with CCN

Observing that high interest rates on US T-Bills have helped boost Tether’s operating profit to around $1B in recent quarters, he added that “a minor portion of these profits will be strategically reinvested in data, energy, and P2P communications infrastructure.”

The rest of the company’s profits are returned to its reserve pools. “This strategy has enabled us to overcollateralize our stablecoins by as much as 104%,” Ardoino observed.

Cash Now Makes Up 86% of USDT Reserves

In the third quarter of 2023, Tether reported  that 85.7% of USDT reserves consist of cash and cash equivalents, i.e. bank deposits and US Treasuries. Such liquid, dollar-based assets now make up the highest proportion of Tether’s reserves ever reported.

In contrast, Tether’s Bitcoin holdings fell from 1.938% of its total reserves to 1.923%.  In dollar terms, this represents a $195M reduction in the value of Tether’s BTC. The company does not appear to have sold cryptocurrency, however, with the losses stemming from Bitcoin’s negative price performance between June and September.

Of course, since then, BTC has surged. As Tether noted in a statement  on Tuesday, October 31, 2023, the substantial price increase witnessed in October has more than offset earlier losses.

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