Tether Holdings Hires Major Wall Street Firm to Manage Treasury Portfolio

According to a story published on February 10 by The Wall Street Journal, stablecoin issuer Tether Holdings has contracted the services of a prominent Wall Street business in order to manage its portfolio of Treasury securities.

The Wall Street Journal cited unnamed persons familiar with the situation in reporting that the financial services business Cantor Fitzgerald is assisting Tether in managing a bond portfolio consisting of United States Treasury securities that is valued at $39 billion. According to the study, there are certain companies on Wall Street who are eager to help cryptocurrency service providers despite the continuous regulatory worries that are impacting the business.

Cantor Fitzgerald is an investment banking firm that was established in 1945 and specializes in providing services such as institutional equity and fixed-income sales. It is said that the corporation employs more than 12,000 workers. Cantor Fitzgerald’s precise role with the stablecoin issuer was not detailed in the material that appeared in the Journal. The only mention of Cantor Fitzgerald’s participation was that it “managed” a piece of Tether’s portfolio.

Tether has become the most significant participant in the digital assets sector, and the company is actively engaging with high-quality counterparties and investigating new business prospects on a regular basis.

As of the 31st of December, Tether’s total assets amounted to $67 billion, which was more than its consolidated liabilities, which were $66 billion, and provided the corporation with surplus reserves of at least $960 million. According to an independent attestation provided by BDO, the corporation’s net earnings for the fourth quarter came in at $70 million million dollars.

While Tether has made efforts to dispel rumors about its solvency and accounting standards, the company has been called out repeatedly by major publications for not being transparent about the assets that back its USDT (USDT) reserves. Tether has responded to these criticisms by saying that it will continue to work toward this goal. In the year 2022, the focus of the criticism switched from the question of whether or not Tether’s USDT is completely supported to the question of the makeup of the assets that support the stablecoin. In response to increased public scrutiny about its portfolio, namely its purported excessive exposure to Chinese commercial paper, Tether had, by the month of October, unwound its exposure to commercial paper and switched to investing in Treasury bills instead.

According to CoinMarketCap, the USDT token issued by Tether continues to be the most valuable stable currency with a market valuation of about $68.2 billion.


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El Salvador’s Crypto Law Allows Bitcoin-Backed Bonds

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El Salvador has recently passed historic legislation that will provide the legal basis for a Bitcoin-backed bond to be issued in the country. This bond, also known as the “Volcano Bond,” will be put toward the reduction of the country’s overall debt as well as the funding of the construction of the “Bitcoin City” that is envisioned for El Salvador.

On January 11, 62 individuals cast their ballots in support of the measure, while 16 individuals cast their ballots against it. When President Bukele gives the bill his stamp of approval, it will be well on its way to being enacted as a statute.

As stated by the cryptocurrency exchange Bitfinex, which is the technology provider for the bonds, the Volcano Bond, which is also known as Volcano Tokens, would make it possible for El Salvador to raise capital to pay down its sovereign debt, fund construction of the Bitcoin City, and create Bitcoin mining infrastructure. All of these goals could be accomplished with the proceeds from the sale of the bonds.

The bonds were given the volcanic description because of the location of the country’s Bitcoin City, which is planned to become a self-sustaining crypto-mining center that will be fueled by hydrothermal energy obtained from the nearby Conchagua volcano. As a direct result of this, the bonds were presented in the form of an active volcano.

According to Bitfinex, the city would function as a special economic zone, analogous to those that can be found in China. Such a zone would offer residents of the city tax breaks, rules that are friendly to cryptocurrencies, and other incentives to encourage them to engage in Bitcoin-related business.

It is anticipated that the issuance of these bonds will bring in one billion dollars for the country, of which half a billion dollars will be allocated to the building of the special economic zone. The first hypothesis suggested that the maturity date of the tokenized bonds would be in ten years, that they would be denominated in U.S. dollars, and that they would bear an annual interest rate of 6.5%.

In addition, the measure creates a legal framework for all digital assets that are not Bitcoin, in addition to those that are issued on Bitcoin, and it also establishes a new regulatory body that will be responsible for administering securities legislation and providing protection from malicious actors.


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A Rising Rate Environment will Tilt from Bonds to Crypto, Says Fundstrat Founder

Speaking on CNBC’s Crypto World Monday, Thomas (Tom) Lee, the founder of equity research firm Fundstrat Global Advisors, opined that with interest rates being on a reversal after experiencing a 30-year decline. 

This is a game-changer for crypto because other investments like bonds will become less attractive. Lee noted:

“That means for the next 10 years, you’re guaranteed to lose money owning bonds… that’s almost $60 trillion of the $142 trillion [of U.S. household net worth].”

He suggested that the $60 trillion would find its way into the crypto sector to earn yield. 

“The obvious thing is it rotates into stocks like FAANG, but I think what is more likely is a lot of speculative capital from equities… it’s really going to be tracing its roots to a rotation out of bonds and it’s going to eventually flow into crypto.”

The market expects the United States for the upcoming rising interest rate hike, with the latest Consumer Price Index (CPI) standing at 7.5% year-over-year. 

Lee, however, acknowledged that an open mind is of the essence in the crypto market based on the volatility experienced. He stated:

“Unless someone really has a crystal ball, it’s very difficult to be precise in crypto. Drawdowns of 40% are really common and bitcoin makes most of its gains in 10 days in any single year. It’s tough to be too precise with crypto. It’s wide lanes.”

Crypto has emerged as an alternative asset class, having experienced significant diversification beyond trademark cryptocurrencies, like Bitcoin (BTC) and Ethereum (ETH), in the last two years.

Some of the new members become active in the cryptocurrency family, such as block decentralized finance (DeFi), stablecoins, and non-fungible tokens (NFTs). Nevertheless, these new assets have to stand the test of time so that investors can gain confidence in them as they have in Ethereum and Bitcoin.

A recent study by blockchain firm Paxos noted that consumers were changing their minds because they were treating crypto as ideal investment vehicles. 

Image source: Shutterstock


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Living on a volcano: The outlook of El Salvador’s crypto mining industry

El Salvador, the first nation to adopt Bitcoin (BTC) as legal tender, has recently announced the relaunch of its wallet app Chivo, which is supposed to patch the previous version’s stability and scalability issues. The update is welcomed news for the Central American country’s crypto experiment, which faced some hurdles and harsh criticism over the last few months. While much of the observers’ attention has been focused on aspects such as retail adoption of crypto and geopolitical implications of Bitcoin’s legal status in El Salvador, the progress of the nation’s mining industry toward achieving President Bukele’s moonshot vision has been less discussed lately. Here’s what the current prospects of El Salvador’s mining industry look like.

“Endless” possibilities

In October 2021, when El Salvador had already become the world’s first country to adopt Bitcoin, one of its main energy sector officials shared his optimistic view on the prospects of crypto mining in the country.

President of the state-run Lempa River Hydroelectric Executive Commission Daniel Alvarez told journalists about the “endless possibilities” to produce energy via hydroelectric, solar, wind and tidal power plants with “willpower” being the only component needed to succeed. “We don’t spend resources that contaminate the environment, we don’t depend on oil, we don’t depend on natural gas, on any resource that isn’t renewable,” he also remarked.

El Salvador’s current energy capacity, however, is rather modest. Reportedly, it has only two geothermal power plants — one at the base of the Tecapa volcano and one in Ahuachapan — that already contribute to Bitcoin mining. Together, they generate slightly under 200 megawatts of electric power and only one of them allocates 1.5 megawatts — the only known figure to date — to Bitcoin mining. Hence, the El Salvador leadership’s ambitions would clearly demand massive developments of new facilities. It looks like they definitely have some ideas in that department.

The Bitcoin city megaproject

In November 2021, El Salvador’s President Nayib Bukele announced his plans to build a new Bitcoin city. The settlement is to be constructed in a ‘“coin shape” at the base of the Conchagua volcano whose geothermal energy would be used to mine Bitcoin. In Bukele’s vision, it should become a perfect combination of glittering neon lights and near absence of taxation:

“Residential areas, commercial areas, services, museums, entertainment, bars, restaurants, airport, port, rail — everything devoted to Bitcoin.”

Keeping up with the regional traditions, this ambitious construction project is to be backed by a bold financial scheme — $1 billion in bonds — half of which would go directly to city construction and the other one would be invested in Bitcoin. The bonds are supposed to last 10 years and pay 6.5% annual interest to their holders. Any investor with a bond share upwards of $100,000 ould qualify for Salvadoran citizenship.

The scheme is backed up by major crypto industry players. Canada-based blockchain technology enterprise Blockstream is responsible for issuing the bonds in the form of tokenized securities on Liquid blockchain while Bitfinex would host them on its platform. According to Samson Mow, chief strategic officer of Blockstram, by the end of the bond’s 10th year, its annual percentage yield will sit at 146% level, as, according to his forecast, BTC price would reach the $1 million mark within five years. That would make El Salvador “the financial center of the world” and “the Singapore of Latin America.”

The many challenges

There is a host of issues accompanying the Salvadoran Bitcoin turn: political backlash against President Bukele and his initiatives, pressure from the IMF and other international actors and the early troubles of the Chivo app. When it comes to plans of massively beefing up the country’s mining infrastructure, there is a number of stumbling blocks as well.

The Bitcoin city announcement saw the existing fiat-denominated El Salvador bonds plummet and raised a number of questions from investment experts, the main one being, “Why buy Bitcoin-backed Salvadoran bonds if you could just buy Bitcoin?” Some pointed out that the country already has a record of failed charter city plans, as well as the fact that the Conchagua volcano, which is supposed to power the city and its BTC mining operations, has recently shown some noticeable seismic activity.

Worse, still, some critics argue that El Salvador’s overall energy profile does not offer great crypto mining potential. One concern is that the country still has to import around 20% of its energy mainly from Honduras and Guatemala. According to some estimates, current industrial energy rates in El Salvador range from $.13 to $.15 per kilowatt-hour while the global average price of Bitcoin mining is around $.05 per kilowatt-hour.

The data from the recent study by DEKIS Research group at the University of Avila ranks El Salvador as number 73 in the global crypto mining potential ranking — while 35% of energy comes from renewable sources. For example, in the United States, this proportion stands at around 7.5%. The levels of national R&D expenditure, human capital index and energy prices put El Salvador closer to the least sustainable countries for mining operations.

Pivoting to renewables

Despite some obvious limitations, the notion of El Salvador’s “endless possibilities” when it comes to mining is not a mere bravado. Like many other Latin American nations, El Salvador possesses a hefty, if yet unrealized, the potential for renewable energy. Talking to Cointelegraph, Philip Ng, vice president of corporate development at green data centers provider Soluna Computing, emphasized the global trend in the direction of making renewable energy more accessible, also noting that it should benefit countries like El Salvador:

Renewable energy is now astonishingly affordable, with the cost to build wind falling 72% since 2009 and solar falling 90% over the same period […] Renewable technologies offer a profound opportunity for South American power markets. Renewable energy assets can be built at a significantly smaller scale when compared with conventional energy. The result is that grids no longer face large transmission and infrastructure buildout costs when trying to add cheap and clean power.

Ng offered the example of Chile, whose recent investments in renewable energy have allowed the country to transition from a net importer of carbon fuels to an exporter of renewable energy. A crucial step in triggering such transition is demand, which is not an easy thing to grow in countries with relatively small populations.

One solution could be to establish a “consumer of last resort,” or a layer of users that would ensure that power producers have a diversified revenue stream and don’t have to rely solely on the utilities. Bitcoin miners could become such a class of consumers. Establishing such an arrangement would also mean that power producers never have to curtail their excess production. A case in point is Kenya, where hydroelectric plants share excess renewable energy with crypto mining facilities.

Responding to Cointelegraph’s request, a Blockstream spokesperson said that an announcement regarding the status of El Salvador’s Bitcoin bonds project will follow at some point in Q1 2022. It is yet to be seen if Nayib Bukele’s exotic aspiration to build a coin-shaped city at the foot of a volcano will materialize in a pragmatic strategy that attracts foreign investments. But, even today it is clear that getting ahead in the renewable energy race will be vital for the success of El Salvador’s massive crypto mining projects.


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Bitcoin Is Massively Overvalued, Billionaire ’Bond King’ Jeff Gundlach

Billionaire Jeff Gundlach has shared his thoughts around bitcoin, saying that the digital asset is massively overvalued. Gundlach who is also known as the ‘Bond King’ is the founder of the investment firm, DoubleLine Capital.

Bitcoin which has suffered numerous dips that have caused it to lose over 30% of its all-time high value continues to struggle, but even at these low prices, the billionaire does not believe that the cryptocurrency is actually worth its current value.

Related Reading | ARK Invest CEO Cathie Wood On What Will Drive Bitcoin Correction

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Bitcoin Is A Spectator’s Market

Gundlach appeared on Yahoo! Finance to talk about a number of issues surrounding the financial markets. The billionaire is infamous among bond investors but talked about why bitcoin remains too high to purchase. For Gundlach, buying bitcoin now is a bad business move. This is because people are getting out as the price is falling and would cause the digital asset to become even more volatile.

However, the billionaire did not warn against purchasing the asset at all. In fact, Gundlach gives a price range at which he thinks that buying bitcoin would be a great move. He explained that investors should purchase the digital asset when it loses another $15,000 from its current value, putting the sweet spot for purchase at $25,000.

“Bitcoin is for speculators at the present moment. I would advise against buying it. It will be volatile as people get out. Maybe you should buy it at $25,000.”

Gundlach, who has always been a big proponent of bonds, continued to push for it. He explains that bitcoin is for momentum investors, which he likened to FAANG stocks, and for him who is an anti-momentum investor, bonds are the perfect fit, saying, “Bonds fit my culture of cowardice.”

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“If you’re a momentum investor, it’s like playing roulette with a strategy that works as long as the wheel doesn’t come up on the zero or double zero. You’re making money, making money, and then eventually you get a double zero and you’re busted. Momentum investors tend to go out in a blaze of glory.”

Bitcoin price chart from TradingView.com

BTC trading at $43,750 | Source: BTCUSD on TradingView.com

NFTs Are Junky Stuff

Bitcoin was not the only crypto asset that Gundlach touched on in his interview. The billionaire also focused NFTs, a fast-growing space that has gone from obscurity to one of the biggest markets in the crypto space in a matter of a year.

He explained that the growth of NFTs was too fast and like bitcoin, was an investment for “investors on large doses of steroids.”

Related Reading | Jack Dorsey Launches Bitcoin Defense Fund To Aid Devs Facing Litigation

Gundlach further said that for him, when it comes to buying things like art, he would only buy quality. Comparing it to real estate, he states that “You should really buy the highest quality, as these assets can appreciate very steadily.”

As the financial markets await a decision from the Fed, the billionaire also warned that the Fed could send the economy into recession if it tightened its monetary policy.

Featured image from Bitcoin News, chart from TradingView.com


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What BTC price slump? Bitcoin outperforms stocks and gold for 3rd year in a row

Bitcoin (BTC) may be down over 30% from its record high of $69,000, but it has emerged as one of the best-performing financial assets in 2021. BTC has bested the U.S. benchmark index, the S&P 500, and the gold.

Arcane Research noted in its new report that Bitcoin’s year-to-date (YTD) performance came out to be nearly 73%. In comparison, the S&P 500 index surged 28%, and gold dropped by 7% in the same period, which marks the third year that Bitcoin has outperformed.

Bitcoin vs. S&P 500 vs. Gold in 2021. Source: Arcane Research, TradingView

At the core of Bitcoin’s extremely bullish performance was higher inflation. The U.S. consumer price index (CPI) logged its largest 12-month increase in four decades this November.

“Most economists didn’t see the high inflation coming, as witnessed by the 1-year ahead consumer inflation expectations,” the Arcane report read, adding:

With its 73% gain in the highly inflationary 2021, Bitcoin has proven itself to be an excellent inflation hedge.

Inflation 2021: Actual CPI vs. Expected CPI. Source: BLS, New York Fed

Bitcoin holdings grew among institutional investment vehicles

Loose monetary policies and a sustained fear of higher inflation also prompted mainstream financial houses to launch crypto-enabled investment vehicles for their rich clients in 2021.

Arcane reported an inflow of 140,000 BTC (~$6.56 billion) across spot- and future-based Bitcoin exchange-traded funds (ETF) and physically-backed exchange-traded products (ETP) this year.

Bitcoin exchange-traded fund holdings. Source: ByteTree, Arcane Research

That prompted more Bitcoin units to get absorbed into investment vehicles, underscoring a greater institutional demand for the cryptocurrency.

In contrast, gold-backed ETFs witnessed an outflow of $8.8 billion in 2021, according to World Gold Council’s report published this December.

Global gold-backed ETF flows. Source: World Gold Council

Volatility behind superior performance?

Nonetheless, Bitcoin’s relatively superior performance in 2021 has included periods of high volatility.

Many analysts believe that extreme price fluctuations keep Bitcoin from becoming an ideal inflation hedge. That includes Leonard Kostovetsky, a finance professor at Boston College, who recalled in his blog post that there had been 13 days in 2021 on which the BTC price has moved over 10% in one direction. Excerpts:

“It seems strange to think that a person who is worried about holding dollars because they lost 7% of their value over the last year would be comfortable holding Bitcoin which could (and often does) lose that much value in a single day.”

Arcane too recognized Bitcoin for being more volatile than the S&P 500 in 2021, noting that the cryptocurrency “behaved like a risk-on asset” by merely amplifying the most significant stock market movements.

The researcher cited VIX — a measure of the expectation of volatility based on S&P 500 index options — to exemplify the relationship between Bitcoin and stock markets. It noted that the BTC price fell hard whenever the VIX readings spiked in recent times, underscoring that institutional traders viewed Bitcoin as a risk-on asset.

Bitcoin vs. VIX. Source: Arcane Research, TradingView

As a result, Bitcoin’s potential to fall harder in the wake of a stock market correction also became higher. Arcane too noted that a bearish 2022 for the S&P 500 may end up wiping a big portion of Bitcoin’s gains.

“Therefore, be aware of stock market headwinds in the next year and their possible implications for bitcoin’s short-term price trajectory,” it added.

Related: Arcane Research releases its crypto predictions for 2022

But hedge fund manager Chris Brown went far in predicting an all-and-all Bitcoin doom in 2022. The Aristides Capital’s managing member stated that cryptocurrencies could face massive selloffs ahead as the U.S. Federal Reserve ends its $120 billion a month asset purchasing program followed by three rate hikes next year.

BTC/USD weekly price chart versus Federal Reserve balance sheet. Source: TradingView 

“If the Fed really does hike rates enough to make money considerably less loose, or if markets believe they will, you are going to see certain areas of speculation come to a screeching halt,” Brown said, adding:

The prime example of such asset speculation is cryptocurrency; here lies $2.64 trillion of ‘wealth’ that is backed by nothing and generates no cash flows.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.