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16/03/2025 3:18 pm
Stablecoins are often marketed as a reliable bridge between the volatile cryptocurrency ecosystem and the stability of fiat currencies like the U.S. dollar. However, their dependence on fiat currencies—which steadily lose value due to inflation—exposes their inherent fragility. Tether, the issuer of the USDT stablecoin, and Brad Garlinghouse, CEO of Ripple (the company behind XRP), have both embraced Bitcoin as part of their strategies, albeit in different ways. This section explores why Tether and Garlinghouse own Bitcoin, how Tether’s business model involves selling a devaluing coin to customers while investing in T-bills and Bitcoin, and why Ripple’s planned RLUSD stablecoin might adopt a similar approach. It also delves into the broader implications of these actions, revealing a strategy that hedges against fiat’s decline while reinforcing its dominance.
Tether, the company behind USDT, holds Bitcoin as a strategic component of its reserve assets. As of 2024, Tether’s Bitcoin holdings exceed $5 billion, representing a small but significant portion of the assets backing its $110 billion USDT supply. This investment reflects Tether’s recognition of Bitcoin’s potential as a hedge against the devaluation of fiat currencies, particularly the U.S. dollar, to which USDT is pegged. With a fixed supply of 21 million coins, Bitcoin offers protection against inflation—a stark contrast to the dollar, which has lost 20% of its purchasing power from 2014 to 2024, according to the Bureau of Labor Statistics (BLS). Additionally, Bitcoin’s historical price appreciation provides Tether with the opportunity for substantial returns, diversifying its reserves beyond low-yield, fiat-denominated assets like T-bills.
Brad Garlinghouse’s Personal Bitcoin Investment
Brad Garlinghouse, the CEO of Ripple, has publicly confirmed that he personally owns Bitcoin. Unlike Tether’s corporate strategy, Garlinghouse’s Bitcoin holdings are a personal investment choice, not a direct reflection of Ripple’s corporate policy. His ownership signals a belief in Bitcoin’s value as a decentralized, scarce asset—qualities that XRP, with its centralized design and pre-mined 100 billion coin supply, does not fully share. Garlinghouse’s stake in Bitcoin suggests he views it as a safeguard against both fiat inflation and the volatility of other cryptocurrencies, including XRP, which dropped 40% in value over six months in 2023. While Ripple as a company has not disclosed Bitcoin holdings, Garlinghouse’s personal investment underscores a broader trend among crypto leaders who see Bitcoin as a long-term store of value.
Brad Garlinghouse, the CEO of Ripple, has publicly confirmed that he personally owns Bitcoin. Unlike Tether’s corporate strategy, Garlinghouse’s Bitcoin holdings are a personal investment choice, not a direct reflection of Ripple’s corporate policy. His ownership signals a belief in Bitcoin’s value as a decentralized, scarce asset—qualities that XRP, with its centralized design and pre-mined 100 billion coin supply, does not fully share. Garlinghouse’s stake in Bitcoin suggests he views it as a safeguard against both fiat inflation and the volatility of other cryptocurrencies, including XRP, which dropped 40% in value over six months in 2023. While Ripple as a company has not disclosed Bitcoin holdings, Garlinghouse’s personal investment underscores a broader trend among crypto leaders who see Bitcoin as a long-term store of value.
Tether’s Business Model: Selling a Devaluing Coin, Investing in T-bills and Bitcoin
Tether’s operations hinge on a model that leverages the stability of a fiat-pegged stablecoin while strategically managing the funds it receives. Here’s how it works:
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Issuing USDT for Fiat
Customers deposit U.S. dollars (or other fiat currencies) with Tether in exchange for USDT, a stablecoin pegged 1:1 to the dollar. This peg provides users with a predictable value in the crypto space, making USDT a popular tool for trading and payments. However, because the U.S. dollar itself is subject to inflation, USDT inherits this devaluation. In real terms, holding USDT is akin to holding a digital version of a currency that steadily loses purchasing power over time. -
Investing in Treasury Bills (T-bills)
Tether takes the fiat it receives and invests heavily in U.S. Treasury bills—short-term government securities known for their safety and liquidity. By 2024, Tether holds over $97 billion in T-bills, making it one of the world’s largest holders of these assets. T-bills provide a modest return (typically 2-5% annually), allowing Tether to earn interest on the funds backing USDT while maintaining the ability to redeem tokens for dollars if needed. This conservative investment cushions Tether against immediate financial risks but ties it to the U.S. government’s fiscal health, which carries its own long-term uncertainties. -
Buying Bitcoin as a Hedge
Alongside T-bills, Tether allocates a portion of its reserves to Bitcoin. This move introduces volatility into its asset mix but serves a dual purpose: it hedges against the dollar’s inflation-driven decline, and it offers the potential for significant gains if Bitcoin’s price rises. For example, Bitcoin’s value surged from $10,000 in 2020 to over $60,000 in 2024, far outpacing T-bill yields. By holding Bitcoin, Tether balances the stability of T-bills with the upside potential of a decentralized asset, effectively using customer funds to speculate on Bitcoin’s growth while selling them a coin tied to a devaluing fiat currency.
Risks in Tether’s Approach
This model is not without vulnerabilities. Tether has faced persistent criticism for its lack of transparency, with no full, independent audit of its reserves as of 2024. Critics question whether it holds sufficient assets to back all circulating USDT, especially if a mass redemption event occurs. Additionally, regulatory scrutiny looms large—U.S. authorities investigated Tether in 2024 for potential sanctions violations, highlighting the legal risks of its operations. If trust in USDT erodes, a depeg (like the 3% drop in 2018) could force Tether to liquidate assets, including Bitcoin, at a loss, amplifying financial instability.
This model is not without vulnerabilities. Tether has faced persistent criticism for its lack of transparency, with no full, independent audit of its reserves as of 2024. Critics question whether it holds sufficient assets to back all circulating USDT, especially if a mass redemption event occurs. Additionally, regulatory scrutiny looms large—U.S. authorities investigated Tether in 2024 for potential sanctions violations, highlighting the legal risks of its operations. If trust in USDT erodes, a depeg (like the 3% drop in 2018) could force Tether to liquidate assets, including Bitcoin, at a loss, amplifying financial instability.
Ripple’s RLUSD: A Potential Mirror of Tether’s Strategy
In 2024, Ripple announced plans to launch RLUSD, a U.S. dollar-pegged stablecoin on the XRP Ledger. This move marks a significant shift for Ripple and suggests it may adopt a strategy akin to Tether’s. Here’s why and how RLUSD could follow this path:
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Selling a Devaluing Coin
Like USDT, RLUSD will be pegged 1:1 to the U.S. dollar, meaning Ripple will sell customers a stablecoin tied to a currency that loses value over time. This decision implicitly acknowledges XRP’s limitations—its price volatility (e.g., a 40% drop in 2023) makes it unreliable for stable payments or as a store of value. By issuing RLUSD, Ripple aims to provide a fiat-backed alternative, mirroring Tether’s approach of offering stability at the cost of inheriting fiat’s flaws. -
Investing in T-bills and Beyond
To maintain RLUSD’s peg, Ripple will need to hold reserves in fiat and fiat-denominated assets, such as U.S. T-bills. This would allow Ripple to earn interest on its reserves, much like Tether, while ensuring liquidity for redemptions. Given Tether’s success with this model, Ripple is likely to follow suit, leveraging T-bills as a safe, income-generating foundation for RLUSD’s backing. -
Potential Bitcoin Investments
While Ripple has not yet confirmed plans to hold Bitcoin in RLUSD’s reserves, it could logically extend Tether’s playbook by doing so. Investing in Bitcoin would hedge against the dollar’s devaluation, diversify RLUSD’s reserves, and position Ripple to profit from Bitcoin’s price appreciation. Ripple already holds a significant stash of XRP (55 billion in escrow as of 2024), and adding Bitcoin could further bolster its financial strategy, especially if XRP’s market performance remains inconsistent.
Why Ripple Might Take This Path
Ripple’s launch of RLUSD reflects a pragmatic pivot toward stability, driven by market demand and XRP’s volatility. By emulating Tether, Ripple could profit from the spread between RLUSD issuance costs (near-zero) and the returns on T-bills and Bitcoin, all while offering users a fiat-pegged tool. However, this approach would also expose Ripple to risks similar to Tether’s: regulatory challenges (Ripple is already embroiled in a U.S. SEC lawsuit as of 2024), reserve transparency concerns, and the potential for a depeg if trust falters.
Ripple’s launch of RLUSD reflects a pragmatic pivot toward stability, driven by market demand and XRP’s volatility. By emulating Tether, Ripple could profit from the spread between RLUSD issuance costs (near-zero) and the returns on T-bills and Bitcoin, all while offering users a fiat-pegged tool. However, this approach would also expose Ripple to risks similar to Tether’s: regulatory challenges (Ripple is already embroiled in a U.S. SEC lawsuit as of 2024), reserve transparency concerns, and the potential for a depeg if trust falters.
Implications: Hedging Fiat’s Decline, Reinforcing Its Power
The strategies of Tether and Ripple (via RLUSD) reveal a dual dynamic: they acknowledge fiat’s weaknesses by hedging with Bitcoin, yet they perpetuate fiat’s dominance by tying their stablecoins to it. This has several implications:
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Profit Motive Over Disruption
By selling USDT and potentially RLUSD, Tether and Ripple profit from customer reliance on fiat-pegged assets while using those funds to invest in T-bills and Bitcoin. This approach prioritizes corporate gains—through interest and Bitcoin’s upside—over Bitcoin’s vision of dismantling centralized financial systems. -
Reinforcement of Fiat Systems
Stablecoins extend the reach of fiat currencies into the digital realm, making them palatable to banks and institutions. Tether’s $97 billion in T-bills and Ripple’s bank-friendly XRP Ledger align with this trend, ensuring fiat remains the backbone of their ecosystems. RLUSD could further cement this dynamic, positioning Ripple as a partner to traditional finance rather than a challenger. -
Risks of Fragility
Both Tether and Ripple’s models depend on trust in their reserves and the stability of the fiat system. A loss of confidence—whether from regulatory crackdowns, reserve shortfalls, or a broader dollar crisis—could trigger depegs or collapses, as seen with TerraUSD’s $40 billion wipeout in 2022. Bitcoin holdings might mitigate some losses, but liquidating them under pressure could exacerbate market instability. -
Bitcoin as a Corporate Hedge
For Tether and potentially Ripple, Bitcoin serves as insurance against fiat’s decline and a speculative bet on its growth. This contrasts with Garlinghouse’s personal stake, which reflects individual conviction in Bitcoin’s decentralized ethos. Yet, in both cases, Bitcoin’s role is subordinated to fiat-centric strategies, not elevated as a replacement.
Conclusion: A Strategic Balancing ActTether and Brad Garlinghouse own Bitcoin for distinct reasons—Tether as a corporate hedge within its reserve strategy, and Garlinghouse as a personal investment in a scarce asset. Tether’s model of selling a devaluing USDT while investing in T-bills and Bitcoin exemplifies a pragmatic approach: provide users with stability, earn steady returns from T-bills, and chase upside with Bitcoin. Ripple’s RLUSD could follow this blueprint, using fiat-pegged stability to mask XRP’s weaknesses while hedging with Bitcoin to offset fiat’s erosion. Ultimately, these strategies reveal a tension in the crypto space: stablecoins and their issuers lean on Bitcoin to protect against fiat’s flaws, yet they reinforce the very system Bitcoin seeks to upend, prioritizing profit and stability over revolution.
This topic was modified 4 months ago by Bobby
