- Tether announces plan to purchase bitcoin to strengthen reserves.
- USDT already holds over $1.5 billion worth of Bitcoin on its balance sheet
Tether has announced its plan to purchase hundreds of millions of dollars’ worth of Bitcoin to back its USDT token. The company intends to invest 15% of its net profit into Bitcoin as part of a strategy to diversify its reserves. This move comes as Tether aims to maintain a 1-to-1 peg to the US dollar for its stablecoin.
Based on Tether’s latest attestation report, the investment would amount to approximately $222 million. However, a Tether spokesperson clarified that the Bitcoin purchase would represent only a small portion of its overall net profit. The majority of the excess income will be allocated to running the business, including covering bank fees.
With a circulating supply of over $82.8 billion, USDT is currently the largest stablecoin in the market. It competes with other stablecoins such as Circle’s USD Coin and Binance’s BUSD. Stablecoins like USDT serve as essential tools for traders, enabling them to move between different cryptocurrencies without converting funds back into fiat currencies.
Paola Ardoino, Tether’s Chief Technology Officer, emphasized the strength and investment potential of Bitcoin, citing its resilience, limited supply, decentralization, and widespread adoption. This decision aligns with the growing trend among notable investors, including Paul Tudor Jones and Michael Saylor of MicroStrategy, who have been accumulating significant amounts of Bitcoin, considering it a hedge against currency depreciation and inflation.
Tether already holds over $1.5 billion worth of Bitcoin on its balance sheet, and this latest purchase will further solidify its position as a major holder of the crypto. Analysts and investors believe that the involvement of influential market players, often referred to as “whales,” could positively impact Bitcoin’s price this year.
Tether has faced controversy in the past due to concerns regarding the quality of its reserve assets and the transparency of its operations. The company previously held a substantial amount of its reserves in commercial paper, a form of short-term, unsecured debt issued by companies, which was considered less secure compared to other assets. To address these concerns, Tether replaced its commercial paper holdings with US government debt securities, aiming to provide greater stability and reassurance to investors.
Tether Continue to Face Scrutiny
Despite these efforts, Tether and its issuer continue to face scrutiny within the crypto market. The US Department of Justice is reportedly investigating Tether executives for possible bank fraud. Stabelcoins have also become a focal point for regulators seeking to establish effective oversight measures following the collapse of several prominent companies in the industry.
All-in-all, Tether’s decision to purchase Bitcoin as part of tis reserves strategy reflects the company’s aim to diversify its assets and leverage the potential of the world’s largest crypto. With USDT’s status as the leading stablecoin, this move will likely have a notable impact on the crypto market. However, Tethe’s operations and regulatory challenges remain topics of interest and concern within the industry.