The assurance opinion for the first quarter of 2024, which was completed by renowned international independent accounting firm BDO, was made public today by Tether Holdings Limited (BVI). The reserves supporting Tether’s fiat-denominated stablecoins are no longer the only financial information revealed by the most recent attestation, which was completed on March 31, 2024, about the Tether Group. The information in the Reserve report, which has been included in this larger, more transparent report, is supplemented by an assessment of the Group’s financial strengths presented in the new report.
With a record profit of $4.52 billion in the first quarter of 2024, the group achieved a major milestone, building on the momentum from Q4 2023.
The primary contributors are the organizations in charge of managing the corresponding reserves and generating stablecoins; net operational earnings, which were mostly obtained from holdings in US Treasury securities, accounted for around $1 billion of this profit. Gold and Bitcoin position mark-to-market gains made up the remaining stated earnings. Furthermore, Q1 2024 demonstrated the Group’s extraordinary success in growing its direct and indirect ownership of US Treasuries, which is already above $90 billion. The calculation of indirect exposure took into account investments made through money market funds in US Treasury securities as well as overnight reverse-repurchase agreements secured by US Treasury securities.
In addition, the Group disclosed its net equity for the first time as part of its unwavering commitment to openness, showing an astounding $11.37 billion as of March 31, 2024. Compared to the reported equity of $7.01 billion on December 31, 2023, this is a significant increase. The report notes that the surplus reserves held by the company as a safety net for its stablecoin offers have increased by $1 billion, bringing the total to around $6.3 billion.
BDO also verified that Tether-issued tokens are backed by Cash and Cash Equivalents at an amazing 90%, highlighting its commitment to maintaining liquidity within the stablecoin ecosystem. This confirms the Reserves’ support of fiat-denominated stablecoins. Furthermore, USDt was issued totaling more than $12.5 billion in only the first quarter.
Tether’s robust financial situation is reaffirmed in the Reserves Report (RR) part of the latest report.
As of March 31, 2024, the management of the company states the following:
- The total amount of reserves for Tether tokens in use is $110,289,406,409.
- A total of US$ 104,027,539,692 is the liability of the companies issuing Tether tokens, of which US$ 104,019,279,735 is related to the digital tokens issued.
- As of March 31, 2024, the value of the assets making up the Reserves is USD 6,261,866,717 more than the value of the liabilities of the companies generating Tether tokens.
With nearly $5 billion invested as of the report date, Tether Group’s strategic holdings span a number of industries, including P2P communication, renewable energy, AI and data, and bitcoin mining. These investments demonstrate Tether’s persistent commitment to its objective, even if they are not covered in depth in the recent report supporting the Fiat-denominated issued tokens.
“Tether has proven its steadfast dedication to openness, stability, liquidity, and prudent risk management with the first attestation of 2024. With a new profit threshold of $4.52 billion, Tether continues to break records, as seen by their most recent report, which highlights the company’s unwavering financial strength and stability. Tether is once again setting the standard for openness and trust in the cryptocurrency space by disclosing not just the makeup of its reserves but also the Group’s net equity of $11.37 billion, according to Paolo Ardoino, CEO of Tether.
Tether has the flexibility to modify the makeup of its reserves in response to shifting market dynamics and community demands.
First outflow day for the BlackRock Bitcoin ETF amid historic ETF leak
For the first time, BlackRock’s IBIT experienced withdrawals of almost $37 million, while the remaining spot Bitcoin ETFs experienced withdrawals totaling more than $526.8 million.
Exchange-traded funds (ETFs) that track spot Bitcoin (BTC) in the US have had historic net withdrawals, while BlackRock’s iShares Bitcoin Trust (IBIT) saw its first outflow day ever.
According to Farside Investors, $36.9 million left BlackRock’s Bitcoin fund on May 1.
According to early Farside Investors statistics, there were outflows of $526.8 million from nine other Bitcoin ETFs. The Hashdex Bitcoin ETF (DEFI) was the only one with no inflows.
With net withdrawals of $191.1 million, the Fidelity Wise Origin Bitcoin Fund (FBTC) witnessed the biggest outflow of the day.
Second place went to the Grayscale Bitcoin Trust (GBTC), which had a $167.4 million withdrawal.
With outflows of $13.4 million and $98.1 million from the Franklin Bitcoin ETF and ARK 21Shares Bitcoin ETF, respectively, it marks the highest single outflow day for the U.S. spot Bitcoin ETFs.
It happens at a time when Bitcoin has dropped 10.7% in the past week.
Nonetheless, Nate Geraci, president of ETF Store, said that this year’s withdrawals from the SPDR Gold ETF and iShares Gold ETF had totaled $3 billion and $1 billion, respectively.
However, Geraci pointed out in a May 2 X post that gold is up 16% year to date.
According to James Seyffart, an ETF analyst for Bloomberg, inflows and outflows are typical during an ETF’s existence, and the Bitcoin ETFs are still “operating smoothly across the board.”
Fed notes ‘lack of additional progress’ on inflation but keeps rates steady
The US Federal Reserve kept interest rates unchanged on Wednesday and indicated that it is still inclined to eventually lower borrowing costs. However, it raised concerns about recent weak inflation data, raising the possibility that any rate reductions may take some time to materialize.
In fact, Fed Chair Jerome Powell stated that it “will take longer than previously expected” for policymakers to get comfortable that inflation will resume the decline towards 2% that had given them hope for much of last year, following three months of unexpectedly high price increases to begin 2024.
This steady development has now stopped, and although Powell stated that rate rises were improbable, he did pave the way for the benchmark policy rate—which has been stuck in the 5.25%–5.50% band since July—to be held indefinitely.
According to Powell, U.S. central bankers are still confident that the present policy rate is exerting enough pressure on the economy to contain inflation, and they are willing to wait as long as it takes for this to happen, even if inflation is only “moving sideways” in the interim.
The personal consumption expenditures price index, which is the Fed’s favored inflation gauge, grew at an annual pace of 2.7% in March, up from the previous month.
Following the conclusion of the two-day policy meeting of the Federal Open Market Committee, Powell stated in a news conference that:
“Inflation is still too high.” “Further progress in bringing it down is not assured and the path forward is uncertain.”
Powell stated that while he still expected inflation to decline during the year, “my confidence in that is lower than it was.”
It is unclear if rates will be lowered this year or not. Powell stated:
“If we did have a path where inflation proves more persistent than expected, and where the labor market remains strong but inflation is moving sideways and we’re not gaining greater confidence, well, that would be a case in which it could be appropriate to hold off on rate cuts. There are routes that lead to cutting and routes that lead to not cutting. The facts will be the determining factor.”
Although the present economic climate is unclear, Powell’s assessment of rate increases as “unlikely” gave investors comfort despite their concerns over a newly hawkish Fed chairman.
The price of US bonds and stocks increased as Powell advocated for patience, which might postpone rate decreases but also set a high standard for further raises. In an effort to slow an increase in inflation, the Fed increased its benchmark policy rate by 5.25 percentage points in 2022 and 2023.
Powell’s speech on Wednesday was “notably less hawkish than many feared,” according to Evercore ISI analysts. “The basic message was that cuts have been delayed, not derailed.”
As seen by prior market pricing, investors in futures linked to the Fed’s policy rate raised their bets that rate reduction may start in September as opposed to later in the year.
Balance Sheet
Noting that “inflation has eased” over the previous year, the Fed’s most recent policy statement maintained major components of its economic assessment and policy advice. It also framed its discussion of interest rates around the circumstances under which borrowing costs can be reduced.
The unanimously agreed statement from the Fed said, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%.”
This raises concerns about when rates will be reduced, and Fed officials have expressed concern that not much has been done to advance the cause in the first few months of 2024.
“In recent months, there has been a lack of further progress towards the Committee’s 2% inflation objective,” the Fed said in its statement.
The US Federal Reserve recently said that, effective on June 1, it will reduce the rate at which it is reducing its balance sheet, allowing just $25 billion in Treasury notes to mature each month as opposed to the current $60 billion. Up to $35 billion in mortgage-backed securities will still expire each month.
The measure aims to prevent the financial system from experiencing a reserve shortage, which occurred in 2019 during the Federal Reserve’s most recent round of “quantitative tightening.”
Although the action may weaken margin financial conditions at a time when the US Federal Reserve is attempting to maintain economic pressure, officials maintain that its interest rate and balance sheet instruments have separate purposes.
The economy “continued to expand at a solid pace,” according to the Fed, which maintained its estimate of economic growth overall. Both job growth and the unemployment rate have persisted in being robust.”
Powell said that the 3.1% increase in private domestic demand was a stronger indicator of the state of the economy, with output supported by a recent spike in immigration, in order to reconcile that with the comparatively modest 1.6% growth of the gross domestic product in the first quarter.
Powell said that the current circumstances are not similar to those observed in the late 1970s, when prices were growing more than 10% yearly at one time coupled with significant unemployment, in response to a question regarding the possibility the U.S. was entering a period of “stagflation” with stalled growth and rising prices.
As of right now, we’re seeing quite steady growth. Our rate of inflation is less than 3%,” Powell stated. “I don’t see the ‘stag’ and I don’t see the ‘flation.’ “
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