Stablecoin issuer Tether has announced a new investment strategy focused on Bitcoin (BTC), the largest cryptocurrency by market capitalization. Starting this month, the firm will regularly allocate up to 15% of the realized profits from investments – excluding any unrealized price appreciation of its reserve assets – to purchase BTC. They will then add these tokens to the reserve surplus. Interestingly, Tether has chosen to custody the acquired BTC on its own, rather than using third-party custodians.
This decision comes on the heels of Tether revealing that it holds $1.5 billion worth of BTC and $3.4 billion in gold among its assets backing the $82 billion USDT stablecoin and its smaller counterparts. A majority of the reserves, around 85%, are held in cash and cash-like assets such as U.S. Treasury bonds, as per the company’s Q1 2023 attestation.
Stablecoins, which have grown to a $131 billion asset class, play a crucial role in the cryptocurrency ecosystem by enabling transactions between fiat money and digital tokens. Tether’s new BTC purchase campaign aims to strengthen and diversify the stablecoin reserves while taking advantage of the cryptocurrency’s price appreciation as an investment.
Paolo Ardoino, Chief Technology Officer of Tether, lauded Bitcoin’s resilience and growth potential, describing the investment as a means to enhance the performance of their portfolio while aligning themselves with a transformative technology. For these investments, Tether will only use realized profits from its operations, disregarding any unrealized capital gains to focus on tangible outcomes. The firm also engages in smaller investments in communication systems, energy, and bitcoin mining infrastructure.
Despite years of criticism surrounding Tether’s transparency and controversial investment decisions, its flagship token USDT has become a safe haven for many. When the U.S. regional banking crisis hit Circle’s USDC – the second-largest stablecoin – Tether managed to maintain its price stability. Its incorporation in the British Virgin Islands and Hong Kong seemingly disconnected it from U.S-based banks and allowed it to emerge as a clear winner from the crisis. As a result, USDT’s circulation has grown 24% this year, while most rivals have experienced significant outflows.
In conclusion, Tether’s new investment approach towards Bitcoin is a step to diversify the company’s portfolio and strengthen its stablecoin reserves. However, this move may also raise some eyebrows given the company’s past controversies concerning transparency and investment decisions. Nonetheless, as the audience for stablecoins continues to expand, Tether’s position in the market remains strong, having demonstrated resilience during times of financial turmoil.
Source: Coindesk
