By George Ward
Tether Holdings, the issuer of the USDT stablecoin, has disclosed its plans to use the largest percentage of profits from its Q1 earnings to buy Bitcoin (BTC) to shore up its reserves. The company recorded a net profit of $1.5 billion in the year’s first quarter, pushing its BTC holdings to almost $1.5 billion.
Tether’s New Investment Strategy
In a recent announcement, Tether stated that it intends to allocate approximately 15% of its net profits towards diversifying assets supporting its USDT stablecoin. As the leading stablecoin in the cryptocurrency market, USDT maintains a steadfast 1:1 peg to the USD.
Based on available data, this Tether plan translates to approximately $222 million allocated toward acquiring Bitcoin to boost the stablecoin’s reserve surplus. At the start of every month, Tether consistently allocated up to 15% of its net realized operating profits to acquire BTC.
The company will also ensure that the existing and potential BTC holdings within its reserves will remain within the boundaries of the Shareholder Capital Cushion. At the same time, it simultaneously boosts, expands, and diversifies its funds.
In addition, the company emphasized its commitment to independent custody of BTC, avoiding reliance on third-party custodians. By embarking on its Bitcoin accumulation endeavors, Tether is poised to become one of the largest holders of BTC.
The firm will join the ranks of distinguished investors like financial guru Paul Tudor Jones and MicroStrategy’s CEO Michael Saylor.
Leveraging Bitcoin Potentials
In its recently published Q1 2023 Assurance Report, Tether disclosed its substantial holdings, revealing approximately $1.5 billion worth of BTC within its reserves. Furthermore, its BTC holdings are complemented by an impressive $3.4 billion worth of gold.
Moreover, an overwhelming 85% of Tether’s reserves are in cash or cash-like assets like the US Treasury Bonds. With its shift towards Bitcoin, Tether is strategically positioning itself to strengthen and expand the diversity of its stablecoin reserves.
At the same time, it is seizing the potential for capitalizing on the price performance of this digital asset as an investment tool. Meanwhile, Paolo Ardoino, the Chief Technology Officer at Tether, stressed the reason behind the company’s Bitcoin investment.
He said, “The choice to allocate resources to Bitcoin, the pioneering and largest cryptocurrency globally, is rooted in its robustness and the promising prospects it holds as an investment asset.” Furthermore, Ardoino highlighted the enduring resilience of Bitcoin, emphasizing its track record as a steadfast store of value capable of long-term growth.
He explained that Tether’s investment in Bitcoin serves a dual purpose. Not only does it enhance the overall performance of their portfolio, but it also enables them to align themselves with revolutionary technology.
This approach allows Tether to embrace the transformative potential of Bitcoin and leverage its innovative capabilities to drive further progress. Nevertheless, Tether has faced significant scrutiny from the cryptocurrency community and regulatory bodies due to its lack of transparency regarding reserves and controversial investment choices.
Furthermore, some authorities doubt the quality of the assets supporting USDT. However, despite these concerns, the USDT stablecoin has proven to be a reliable refuge for investors.
This was evident during the March 2023 US bank crisis, when Circle, the issuer of the second-largest stablecoin (USDC), had issues accessing their funds from certain banks.