The company said it would invest 15% of its net profit into bitcoin to “diversify” the reserves that back its USDT token, which aims to stick to a 1-to-1 peg to the U.S. dollar.
Which roughly amounted to around $222 million, based on the company’s last corroboration report, providing a breakdown of the assets that construct its USDT reserves as well as excess reserves and gains.
“The bitcoin that I purchased would amount to only a small portion of its overall net profit, with the bulk of excess income being spent on running the business, which includes bank fees,” a Tethers’ spokesperson clarified in a note.
“The aim is to keep the Bitcoin portfolio value well below the size of our total excess reserves, which accounted for 2.48 billion at the end of Q1/2023, while bitcoin holdings accounted for 1.5 billion,” the spokesperson added.
With a circulating supply of more than $82.8 billion, USDT is the market’s largest stablecoin, according to CoinGecko data.
Moreover, it is eligible to compete with Circle’s USD coin and Binance’s BUSD.
Stablecoins are typically used by traders to move in and out of different cryptocurrencies without inducing money back into fiat currencies.
Paolo Ardoino, CTO of Tether, said in a statement that “the decision to invest in Bitcoin, the world’s first and largest cryptocurrency, is underpinned by its strength and potential as an investment asset.”
“Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. Its limited supply, decentralised nature, and widespread adoption have positioned Bitcoin as a preferred choice among institutional and retail investors alike,” he added further.
It is forecast that this move would make Tether an even bigger holder of bitcoin, whereas the firm already holds over $1.5 billion worth of bitcoin on its balance sheet, following moves from significant investors like Paul Tudor Jones and MicroStrategy boss Michael Saylor to collect huge stockpiles, believing that the token is immune to the effects of inflation and currency depreciation.
Previously, analysts and investors told CNBC that bitcoin might get a boost this year due to the impact of so-called “whales”—market players with imperative monetary firepower, which allows them to purchase substantial amounts of tokens.
Tether’s strategies for maintaining a $1 value for its token have already sparked debate due to worries about the integrity of its reserve assets.
In the past, the company also held a great deal of its finances in commercial paper — a form of short-term debt that is labelled as an unsecured debt issued by companies. This is seen as riskier than other types of debt, such as U.S. Treasury bills.
Tether attempted to assuage investor concerns by removing commercial paper from its portfolio and replacing it with purely US government debt securities.
In February, the firm claimed that it had trimmed its commercial paper holdings to zero.
USDT and its issuer remain a source of belief in the crypto market. The U.S. Department of Justice, on the other hand, is reportedly investigating executives at Tether over possible bank fraud.
Stablecoins were already a hot-button issue for regulators, who have been tumbling to figure out how to keep checking the industry after the demise of various significant firms in the sector.
- Published By Team Genuine Reporter