Are the BTC buyers in the room with us? Why yes, yes they are. After a blowout Q1 assurance report where Tether reported $1.48B in net profit, Tether announced today that it will commit to using up to 15% of its future monthly net operating profits to purchase Bitcoin as part of its excess reserves.
Today, Tether has roughly $2.44B in excess reserves. This represents collateral on top of the 100% reserves needed to back USDT. These excess reserves have traditionally been accrued through interest on treasury bills and other securities. Don’t worry, Tether is not going to use any of the collateral backing USDT to buy Bitcoin.
Microstrategy owns ~140K Bitcoin, worth roughly $4B today, while Tether owns ~55K Bitcoin, worth roughly $1.5B today. Tether also owns $53B in US treasuries. Assuming the current Fed Funds Rate of 5% holds, that is $2.65B in annual interest income. 15% of estimated annual income is $400M, so it’ll take a few more years for Tether to overtake Microstrategy in terms of Bitcoin holdings.
Historically, tightening monetary policy has negatively impacted risk assets. However, with Tether’s new plan, Bitcoin may now even partially benefit from a high interest rate environment. Although $400M in buy pressure is negligible, this could help Bitcoin start to decouple from the wider risk-on asset class if more start doing the same. Another interesting note is that Tether holds $3.4B of precious metals. Maybe Tether wants to bring back the gold standard but add a bit of BTC to the mix this time.
On May 1, NFT marketplace Blend launched Blur, their peer-to-peer perpetual NFT lending protocol. We’ve internally debated ad nauseum about this product and the risk behind its mechanics when dealing with illiquid jpeg collateral, and to be honest, I still think NFT lending is silly. Some of my internet friends seem to agree too.
But sometimes, the best ideas are the ones most people don’t understand at first. While it is still very early in Blend’s (and Blur’s) life, I find it interesting that there is now more daily NFT loan volume than daily trade volume on the platform. Since its launch, Blend has made over 8,800 loans for a total of nearly 30,000 ETH. Yesterday was the highest volume day thus far, with over 12,000 ETH lent out.
I am not a JPEG connoisseur, but when I see traction for a new product in the market, I make note of it.
LSTFi (liquid staking finance) is likely going to be the narrative of DeFi next cycle as LST providers continue to grow and new protocols design ways to repackage/leverage LST yield in compelling ways. One of the use cases we are excited about is an LST-backed stablecoin that leverages the yield to lower borrow costs and expand supply.
Prisma is a new omnichain stablecoin protocol backed by Curve Founder Michael Egorov that plans on onboarding a basket of ETH LSTs to create a stablecoin with self-repaying loans. With FIP-227, Prisma is looking to align with Frax by giving Frax a pre-launch allocation to the tune of 0.3% of the PRISMA supply for $100k.
Investing in Prisma gives Frax a chance to further bolster both its treasury and brand moat. Additionally, with sfrxETH likely becoming highly desirable collateral for Prisma’s stablecoin due to its competitive yield, a partnership with Prisma will likely be a significant growth driver for frxETH. Aligning Prisma and Finance should produce positive sum outcomes for both protocols.
Kwenta has undergone significant developments since our last report in December, including the activation of a “fee switch,” bringing a mechanism for fundamental token value accrual.
One of the largest catalysts for Filecoin happened in 2023: the launch of the Filecoin Virtual Machine (FVM), which now enables smart contracts on the network.
Apple Gives Axie Infinity Green Light on App Store
Axie Infinity developer, Sky Mavis, also announced an NFT marketplace
Tether’s Latest Investment Strategy: Make Profits, Buy Bitcoin
We’ll take our time, thank you very much, says Gensler’s SEC
The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.
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