TBW - Inside Tether's diversification strategy

Key points

• The company has made historic profits, with around $10bn already in the first three quarters of the year ($4.3bn in Q3).
• Tether is strengthening its balance sheet by sharply increasing the proportion of secured loans (+44% quarter-on-quarter) and gold in its reserves.
• The fall in rates is threatening its profitability, but the company still has time to reduce its reliance on Treasury bills.
• The Tether group's equity could reach up to $30 billion.
• The average return on investments managed by Tether Investments is around 13% to 14%.

Introduction

In the crypto ecosystem, two topics are currently focusing all the attention: stablecoins and tokenisation. Born in 2014 with the ambition of becoming the liquidity layer for digital assets (and, eventually, a web-native means of payment), Tether quickly understood the market's potential and established itself as one of the world's most profitable companies per employee.

With $135 billion in Treasury bonds according to its latest audit, Tether is no longer just the stablecoin behemoth: it is also one of the United States' largest foreign creditors, a key player in the engine that sustains demand for US debt.

The 2022-2024 period, marked by rising rates, boosted its profitability and enabled it to consolidate its reserves by developing new sources of income.

In 2025, the cycle reverses: the Fed cuts rates, nominal yields fall and income from reserves erodes. But Tether saw this coming. Buoyed by years of deposit growth and gains on its liquid assets, the company is entering this slowdown phase from a position of strength, and remains largely profitable.

Tether's business model

Tether has established itself as one of the most profitable players in the sector, thanks to a model based almost entirely on the management of a gigantic portfolio of US debt.

The company is now the 17th largest foreign holder of T-bills, a rank usually occupied by central banks or sovereign wealth funds.

At 30 September, its latest independent audit showed $181 billion in assets, including around $135 billion invested in US Treasury bills with a maturity of less than 90 days, directly or via several vehicles: money market funds, reverse repo operations and similar highly liquid investments.

Tether favours these products for one simple reason: their near-instant liquidity. In the event of a confidence shock or mass withdrawal, these assets can be converted into cash within a day, allowing the company to best defend the USDT's 1:1 peg.

Contrary to popular belief, Tether does not take commission on the use of the USDT. Its turnover comes essentially from one category: the return generated by reserves, which can be broken down into several lines.

First, interest on T-bills, which have become extremely remunerative in a high rate environment. Secondly, income from secured loans, repos and reverse repos and other low-risk investments. It is these flows that form the basis of operating profit.

To this "safe" layer, we need to add a second driver: unrealised gains on investments in bitcoin and gold, which Tether accounts for in marked-to-market. The company has accumulated several billion dollars in Bitcoin and gold in recent years. When prices rise, the value of these reserves mechanically inflates its profits.

When prices fall, the opposite effect is possible, but at this stage the company benefits from a significant margin of safety.

The recent cut in the Fed's key rates slightly reduces yields on T-bills, but without calling into question the overall equation. As long as the supply of USDT continues to grow (and it has exceeded $180 billion in circulation) Tether is collecting ever more deposits, and therefore ever more assets to invest. With even a moderate average rate of return, the company remains based on a model that mechanically prints income.

The impact of falling yields on T-Bills

In September, the Fed began a cycle of monetary easing that could bring the Fed Funds Rate down to around 3.5% by the end of the year or early 2026 (compared with 3.75-4% today). For issuers of dollar-indexed stablecoins (whose profitability depends directly on the yield on T-Bills) the shock is immediate.

Bond markets have already anticipated this trajectory. The yields on 1-month, 2-month and 3-month T-Bills are now 3.945%, 3.891% and 3.858%. Using the two-year rate as a leading indicator, this equates to a potential fall of 18.6% from the levels seen in the second quarter.

This rate compression inevitably puts pressure on Tether. Yields will fall: the only unknown now is the extent of the decline.

So far, the company has compensated by further expanding its exposure to T-Bills. Revenues derived exclusively from these securities rose by $59 million between the second and third quarters, compared with $35 million between the first and second. The reason: a 7.63% increase in the allocation to T-Bills in Q2, compared with 4.10% in Q1.

But this strategy is reaching its limits. To maintain its current pace, Tether must continue to increase its bond portfolio by at least 6% per quarter, as it did in 2025. If rates do indeed fall towards 3.75-3.5%, without further allocation increases, the company could generate $30 million less than in the third quarter - and up to $150 million less if rates had remained at their previous levels.

For now, Tether has absorbed the fall in yields thanks to the growth of its liquid reserves. The real test will come in 2026: if rates fall back below 3%, every 50 basis point reduction will significantly erode income from reserves. Nothing that threatens the USDT hedge, but enough to reduce Tether's ability to invest, diversify its balance sheet or maintain the current pace of its ancillary projects.

>> What impact will rate cuts have on Tether and Circle's profitability?

Tether's diversified approach and competitive advantage

The return on USDT liquid reserves is not just used to generate profits: it fuels a broad investment strategy driven by Tether Investments. Thanks to these profits, the group is financing projects in a wide variety of sectors (AI, Bitcoin mining, renewable energies, blockchains, streaming) while maintaining positions in more traditional and stable businesses such as agribusiness.

In September 2025, Tether is also said to have launched a round to raise between $15 billion and $20 billion, which would value the group at around $500 billion (around 3% of the capital). The aim: to develop the future stablecoin USAT, compliant with the GENIUS Act, and accelerate investment in AI.

>> Tether, soon to be valued at $500 billion?

Tether Investments operates using the group's own funds and the profits accumulated by its parent company. At the end of each year, Tether pays an internal dividend corresponding to its profits, all of which is transferred to the investment subsidiary. For 2024, this amount reached 10.255 billion dollars.

Tether Investments then operates like a genuine venture capital fund: investments over 3 to 5 years, majority or minority shareholdings, heavily discounted valuations, and the search for internal returns of up to 40%. On exit, the group often targets multiples of at least x5 on the revenues or earnings of the companies financed.

Main investments

Rumble: $775 million

This is Tether's biggest bet. The group has invested $775 million at the end of 2024 for around 48% of the capital of Rumble, a video streaming, hosting and cloud platform. The strategic aim is to tap into its 50 million users to drive adoption of the USAT stablecoin via a native wallet.

At this stage, however, the position is down 23% at the end of 2025.

Adecoagro: $600 million

The second major move: a $600 million ticket in this South American giant operating on more than 200,000 hectares in Argentina and Brazil. The company combines agricultural activities, renewable energies and tokenisation of assets, with an energy capacity of 1.1 million MWh via solar panels and biomass (notably sugar cane). Tether sees this as a diversification with a more stable return.

Twenty One: 25,000 BTC (approximately $2.9 billion)

Tether has injected the equivalent of $2.9 billion into the purchase of 25,000 BTC via the Twenty One structure (a Bitcoin Treasury Company), giving it more than 50% of the capital. The deal does not generate direct revenue, but is a strategic pillar of its exposure to Bitcoin.

The AI offensive and L1 bets

Tether is investing heavily in AI with QVAC, an in-house platform aimed at decentralising artificial intelligence via a peer-to-peer network, a far cry from centralised cloud architectures. The group is championing open source AI, backed by a blockchain layer to secure transactions.

In total, Tether's venture arm plans to allocate around $5 billion to developing its AI portfolio.

On the blockchain infrastructure side, Tether participated in the financing of Plasma, a Layer 1 launched in June, following two rounds that raised $28 million. Its CEO Paolo Ardoino appears in the capital as an angel investor.

An investment in football

Among the more exotic investments, Tether now owns 11.5% of Juventus Turin football club. The real value of this stake in the prestigious Italian team remains unclear, but it could serve as a soft power lever, similar to Qatar's strategy with Paris Saint-Germain.

After a long battle, Tether won a seat on the board of directors in early November.

The Big Whale's analysis

Tether has never been an explosive growth company. Its strength lies in a remarkably stable, patiently built business model, which today makes it one of the world's most profitable companies per employee. Exceeding $10 billion in profits for the year sends a clear signal: despite falling rates, balance sheet diversification is paying off.

Where Circle concentrates almost all its reserves in US Treasuries, Tether is adopting a more diversified strategy: fast-growing collateralised loans, gold, Bitcoin, venture investments in tech, AI, blockchains and agriculture. This approach offers greater room for manoeuvre in the face of eroding bond yields.

This strategy has areas of vulnerability. Venture investments require high performance (both in terms of internal rate of return and multiples) to create value. Bad arbitrage, unfavourable market conditions or poor execution can quickly deteriorate a position.

But the trajectory remains consistent. By expanding its balance sheet, maintaining deposit growth, preserving the USDT peg and preventing a peripheral asset from undermining the whole, Tether is gradually moving into a unique category. If the trend continues, the company could well become the world's most profitable per employee.

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