Stablecoin Tether (USDT) is looking to lend to international commodity traders, especially in developing markets. Tether’s high returns and existing connections could create lucrative opportunities.
Tether could potentially reap significant profits from credit-hungry business ventures, especially as it faces competition in the stablecoin market.
Tether global connection
According to a report from Bloomberg, Tether (USDT) is considering entering the commodity business. Stablecoins have been very successful in their 10 years of operation, especially in developing countries. Partnering with commodity traders could leverage Tether’s advantage, especially if competitors are looking to enter.
Read more: 9 Best Crypto Wallets to Store Tether (USDT)
Total market capitalization of stablecoins. Source: Defilama
Several key factors could make Tether suitable for global commodity traders. First, such businesses rely heavily on credit and typically involve traditional financial institutions. This could become especially difficult as U.S. sanctions tighten. Russian metal producers are already using USDT to facilitate smooth international trade.
Essentially, producers of goods in many countries are unable to trade on their own terms due to strict credit requirements, regardless of the quality of their products. Tether is so well-funded and uniquely popular in many such countries that it may have the opportunity to act as a credit facility in its own right.
If Tether’s plan is successful, it could benefit greatly from this opportunity. Commodity markets are extremely lucrative, and Eric Balchunas observed an increasing correlation between the gold market and the crypto ETF market last year. Tether has already launched a gold-based Real World Asset (RWA) and could expand to other instruments at any time.
“Interestingly, since the launch of the Bitcoin ETF, Bitcoin has hit all-time highs five times, while gold has hit all-time highs 30 times. Even if it was only in dollars, the net inflows to the Bitcoin ETF were $19 billion,” Balciunas said.
Read more: Tokens backed by real world assets (RWA) explained
Gold and Bitcoin prices are high. Source: Bloomberg
Additionally, Tether has already experimented with commodity trading for Russian metals and Venezuelan oil, and some commodities are already intertwined with cryptocurrencies.
However, there are many potential drawbacks. This is because commodity trading is prone to fraud and failure, and Tether may command better profit margins than traditional creditors. The higher the profit margin, the higher the risk.
So far, Tether has been very close to releasing details of its plans, with CEO Paolo Ardoino claiming they are in the “early stages.”
“We probably won’t reveal how much we plan to invest in commodity trading. We are still developing our strategy. We are interested in exploring different commodity trading possibilities.” said Adroino, adding that he believes the opportunities here will be “huge in the future.”
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